[Click e-Stock] "KT&G Accelerates Global Expansion... Target Price Maintained"

On January 14, Hanwha Investment & Securities maintained its "Buy" investment rating and target price of 180,000 won for KT&G.

On this day, Han Yu-jeong, a researcher at Hanwha Investment & Securities, stated, "There is a high possibility that the price of domestic combustible cigarettes will be raised within the year," and added, "Even without this factor, bold moves are expected, such as growth in overseas combustible cigarette sales, structural changes in the heated tobacco (HNB) business, and the launch of the nicotine pouch business."

The company is expected to meet market expectations for its fourth-quarter results last year. Consolidated sales are estimated at 1.717 trillion won (up 10.3% year-on-year), and operating profit at 245 billion won (up 15.3%), in line with the market consensus (operating profit of 246.6 billion won).

Expansion of overseas combustible cigarette sales is also a positive factor. The researcher explained, "The initial operating rate of the Kazakhstan plant, which was completed in April last year, is reported to be in the 70% range. Although still in the early stages, after stabilization, expansion of exports to neighboring countries and reduction in manufacturing costs are expected."

She also added, "A new plant in Indonesia, one of the main subsidiaries, is scheduled for completion this year. Both the new plants in Kazakhstan and Indonesia will have a final production capacity exceeding 10 billion sticks, so the expansion of overseas production is likely to serve as a catalyst for the full-scale overseas business."

The HNB business is also entering a new phase. Starting this year, KT&G will enter the second phase of its contract with Philip Morris International (PMI), and will begin direct deployment of its HNB portfolio in countries where it has a strong presence. The researcher noted, "There were some delays in the launch schedule for new platforms due to device supply chain issues, but as of now, the supply chain problems have been completely resolved, making it highly likely that new platforms will be launched within the year."

Additionally, the researcher stated, "The expansion of ASF's nicotine pouch business into new countries, following last year's acquisition, is also expected to take place within the year. A dramatic portfolio restructuring is underway, centered on the domestic combustible cigarette business," she added.