[Click eStock] "KT&G, Favorable Exchange Rates and Strong Overseas Sales"

IBK Investment & Securities expects KT&G's first-quarter earnings this year to slightly exceed market expectations, supported by overseas tobacco sales and improved real estate performance. The investment rating was maintained at 'Buy' with a target price of 130,000 KRW.

KT&G's consolidated sales and operating profit for the first quarter of this year are estimated at 1.4263 trillion KRW (+10.4% year-on-year) and 283.8 billion KRW (+20.0%), respectively. Kim Taehyun, a researcher at IBK Investment & Securities, explained, "Amid a favorable exchange rate trend, overseas cigarette sales and the base effect in the real estate sector are expected to slightly surpass market expectations (1.4057 trillion KRW, 274.4 billion KRW)."

By segment, tobacco sales and operating profit are expected to be 957.1 billion KRW (+11.7%) and 251.7 billion KRW (+21.8%), respectively. Researcher Kim said, "Domestic cigarette sales are expected to decline by 3% due to fewer operating days and weather effects, but the trend of market share growth appears to continue," adding, "Overseas cigarette sales are projected to improve by 37% due to increased sales volume and higher average selling prices." In particular, exports are estimated to have maintained strong sales centered on the Middle East and Latin America, while overseas subsidiaries showed robust sales mainly in Indonesia and Kazakhstan.

Sales and operating profit in the health functional food segment are estimated at 318.3 billion KRW (+3.2%) and 22.3 billion KRW (-3.1%), respectively. Researcher Kim noted, "Domestic sales are somewhat sluggish due to reduced consumption, but slight sales growth is expected thanks to strong sales during the Chinese Lunar New Year period," adding, "However, profitability is expected to decline due to continued increases in marketing expenses related to new brand launches." During the same period, the real estate segment is expected to see sales and operating profit improve by 34.1% and 114.4%, respectively, reflecting development project results in Anyang and Mia.