Generous Shareholder Returns Drive KT&G to Record-High Corporate Value

KT&G Stock Price Hits Record High of 144,000 Won
Virtuous Cycle Established as 'K-tobacco' Globalization Drives Domestic Value-Up Leadership
Active Shareholder Return Policies... "Growing Together with Shareholders"

KT&G's corporate value is soaring. Expectations for improved performance have grown due to the strong growth of its overseas cigarette business, and the company's recent stock price has reached an all-time high, driven by active shareholder return policies such as share buybacks and high dividends.

According to the Korea Exchange on July 22, KT&G's stock price climbed to 144,000 won during trading on July 14, setting a new all-time high and continuing its upward rally. This represents an increase of more than 50% from its yearly low of 94,600 won.

Kyungman Bang, CEO of KT&G

This stock price surge is attributed to the solid performance resulting from the globalization of 'K-tobacco' and the virtuous cycle created by ongoing shareholder return policies based on this performance.

KT&G achieved record results last year, posting consolidated sales of 5.9088 trillion won and operating profit of 1.1888 trillion won. In particular, in the first quarter of this year, the overseas cigarette business achieved 'triple growth,' with sales volume up 23%, revenue up 54%, and operating profit up 312% compared to the previous year.

This was the result of a profitability enhancement strategy focused on strengthening its 'core business competitiveness.' To improve efficiency, the company completed the expansion of its plant in Turkiye and the construction of a new plant in Kazakhstan in the first half of the year as part of its global production base strategy. In overseas markets, KT&G is also strengthening its local market dominance through price mix strategies.

Industry experts expect KT&G to continue its growth trajectory this year, centered on its core cigarette business. For the second quarter of this year, KT&G's consolidated sales are expected to reach 1.5161 trillion won, up 6.5% year-on-year, and operating profit is forecast to increase by 4.7% to 337.1 billion won. The industry anticipates that if the current trend in overseas cigarette sales continues, overseas market revenue will surpass domestic revenue for the first time in 10 years, since overseas sales volume overtook domestic volume in 2015.

The improvement in performance is being translated into expanded shareholder returns. Kyungman Bang, CEO of KT&G, has been driving large-scale shareholder return policies as part of the company's 'Value-Up Strategy' since taking office last year.

KT&G has announced a world-class value-up plan, which includes a total cash return of 3.7 trillion won, including cash dividends and share buybacks from last year through 2027, as well as the cancellation of more than 20% of total issued shares, including newly repurchased treasury shares.

Accordingly, last year, the company executed a cash return of about 1.1 trillion won, achieving a total shareholder return ratio of 100%, and actually canceled treasury shares equivalent to 6.3% of total issued shares. This year, KT&G is operating a value-up program at an even higher level, and recently, by restructuring low-yield and non-core assets such as real estate, the company plans to secure about 1 trillion won in cumulative cash by 2027. This will be used to enhance capital efficiency by allocating funds to shareholder returns such as dividends and share buybacks, as well as to growth investments.

Kyungshin Lee, a researcher at iM Securities, commented, "The operating performance that exceeds expectations due to the global growth of the tobacco business demonstrates that the company's improved fundamentals are not just a temporary phenomenon. Considering KT&G's rapid response to market changes in its core business segments and its shareholder return policies, the company will continue to serve as an excellent investment option that offsets external uncertainties."

The government's 'Livelihood Recovery Consumption Coupon' program is also expected to serve as a favorable factor for domestic cigarette sales. Eunae Ryu, a researcher at KB Securities, stated, "Reflecting the effect of the subsidy payments, we have revised our estimate for the annual growth rate of domestic cigarette sales in the second half from -6.6% to +6.0%. We took into account the fact that domestic cigarette sales increased by 8.4% year-on-year in the third quarter of 2020, when emergency disaster relief funds were distributed, and that convenience stores, which are included as eligible outlets for the current subsidy, account for the largest share of domestic cigarette sales channels."