[Click eStock] Hankook Tire & Technology, Four Consecutive Quarters of Surprise Earnings... Stock Price Hits Bottom

Meritz Securities announced on the 5th that it has set a target price of 75,000 KRW and a 'Buy' investment rating for Hankook Tire & Technology.

In a report released that day, Junseong Kim, a researcher at Meritz Securities, stated, "Despite four consecutive quarters of surprises, the stock performance is disappointing," adding, "The closing price on the 4th was 42% lower than the year's high of 63,300 KRW (April 16)."

Hankook Tire & Technology's third-quarter sales increased by 4% year-on-year to 2.44 trillion KRW, and operating profit rose by 19% to 470 billion KRW, exceeding consensus estimates by 6% and 15%, respectively.

Researcher Kim analyzed, "Despite rising raw material input prices and increased logistics costs, the cost ratio dropped to an extremely low level," adding, "This level of cost ratio is the first since 2016, when raw material input prices fell to the low $1,000s per ton."

Kim viewed this strong performance as based on a changed fundamental strength due to the expanded proportion of high-margin BEV sales. He said, "The expansion of high-margin BEV sales within OE sales is cited as the basis for structural performance improvement," and added, "They are securing customers who continue to expand market share in the overall automobile market, including Tesla, achieving both top-line growth and improved profitability mix."

He also expected stable cash flow to continue even after the acquisition of Hanon Systems. Researcher Kim stated, "The valuation de-rating following the Hanon Systems acquisition was excessive," and commented, "The management's decision is clearly regrettable. However, better-than-expected operating performance guarantees stable cash flow even based on the post-acquisition period."