[Click eStock] "Hankook Tire, Quick Stock Price Recovery Difficult in Short Term... Target Price Down"

Target Price Revised Downward by 20.6% Compared to Previous Estimate

On the 31st, KB Securities downgraded the target price of Hankook Tire & Technology from 63,000 KRW to 50,000 KRW, maintaining a 'Hold' investment rating, citing difficulties in a rapid stock price recovery in the short term.

Researcher Kang Sung-jin of KB Securities explained, "We lowered the target price by 20.6% compared to the previous level, reflecting the cash outflow of 1.4 trillion KRW required for the acquisition of existing shares during the acquisition of Hanon Systems' stake, as well as changes in free cash flow generated from Hanon Systems."

Although there is some potential for stock price appreciation, a rapid recovery in the short term is unlikely. Researcher Kang said, "While the ability to generate operating profit is still considered solid and the recent sharp decline in stock price has partially restored the potential for price increase, considering investors' concerns about the long recovery period for equity investment (additional purchase of Hanon Systems shares) and the possibility of delays in shareholder return policies, the stock price is not expected to recover significantly in the short term."

Performance is expected to be favorable. Researcher Kang stated, "Hankook Tire & Technology's operating profit for the second quarter is expected to reach 414.4 billion KRW, a 67% increase compared to the same period last year, exceeding the consensus (average securities firm forecast) by 2.7%. Considering the rise in raw material prices, the variable cost per tire for the second quarter has been raised by 0.5%, but taking into account the tight supply and demand situation in the overall tire market and the tendency of consumers burdened by accumulated price increases to shift to second-tier (just below the top tier) tires, the average selling price (ASP) assumption was raised by 3.0%." KB Securities forecasted the annual operating profit for this year to increase by 23.3% year-on-year to 1.6369 trillion KRW. Researcher Kang added, "This exceeds the market consensus by 9.4% and KB Securities' previous forecast by 9.9%, reflecting the upward revision of the ASP assumption and the downward adjustment of fixed cost forecasts."