[Click e-Stock] "KG Inicis Expected to See Gradual Share Price Rise on Second-Half Industry Recovery"

Shinhan Investment Corp. on June 12 evaluated KG Inicis, stating, "With industry conditions expected to improve in the second half of the year and the effect of onboarding new merchants, the company is likely to escape negative growth and see gradual improvement in its performance, which could enable a steady rise in its share price." The firm maintained its "Buy" investment rating and a target price of 13,000 won.

Park Hyunwoo, a researcher at Shinhan Investment Corp., analyzed, "The consumer sentiment index in May recovered to 101.8, and expectations for new government policies and domestic demand stimulation are leading to a rebound in the share price."

The company’s second-quarter results this year are expected to be somewhat sluggish. Operating profit is projected to be 26.5 billion won, representing a 1% decrease compared to the same period last year. Park noted, "While subsidiaries (F&B, education, capital, etc.) continue to underperform, a recovery in the payments segment is ultimately essential for an overall rebound in performance." He further explained, "Due to a negative base effect prior to the TMON incident, transaction volume in the second quarter is expected to decrease by 4% to 7.8 trillion won. However, in the second half of the year, a rebound is anticipated through the inflow of new merchants and increased market share in fashion, IT, and platform merchant sectors."

He also analyzed, "There is potential for growth even after offsetting the loss in existing transaction volume." He added, "If additional budgets such as local currency stimulus are executed, online consumption is also expected to expand. Although the travel, airline, and ticket (OTA) segment was somewhat sluggish at 0.9 trillion won, there is ample upside potential starting from the Chuseok holiday period."

The resolution of non-recurring expense factors is also positive. Park explained, "In the past, to resolve circular shareholding, KG Chemical shares were donated to a public interest foundation, resulting in expenses amounting to around 9% of separate net income. However, with the elimination of these non-recurring factors, about 4 billion won in expenses has been resolved."

He added, "In line with the corporate value enhancement plan announced at the end of last year, 350,000 treasury shares (1.3% of shares outstanding) were cancelled in March this year. The company aims to achieve a total shareholder return rate of 30% by 2026, including a 25% dividend payout ratio based on separate net income and 5% treasury share cancellation."

Park stated, "Currently, KG Inicis's 12-month forward PER (price-earnings ratio) stands at around 4.0 times, which is a comfortable range." He explained, "Applying a target PER of 5 times, we are maintaining our target price at 13,000 won."