[Click eStock] "KT&G, Philip Morris Partnership on E-Cigarette Exports is a Positive Development"

Hana Financial Investment Issues 'Buy' Investment Opinion and Target Price of 143,000 Won... Closing Price on 29th at 95,100 Won

[Asia Economy Reporter Kum Boryeong] KT&G has been reported to have received a positive boost after signing an export partnership for electronic cigarettes with Philip Morris.

According to Hana Financial Investment on the 30th, KT&G signed an export partnership contract with Philip Morris for smoke-free products (including devices) the previous day.

Through this, Philip Morris will gain the rights for marketing, distribution, and sales of KT&G's smoke-free products in overseas markets excluding Korea for the next three years. KT&G is expected to receive sales proceeds based on supply price and royalties.

Shim Eunju, a researcher at Hana Financial Investment, explained, "KT&G can expand its export reach through Philip Morris's distribution channels without marketing burdens and gain opportunities to acquire Philip Morris's capabilities in the global market, such as sales know-how. Philip Morris is understood to highly evaluate KT&G's product technology that allowed it to quickly catch up with 'IQOS' market share domestically."

KT&G's expected sales after three years are estimated to be between 300 billion and 500 billion KRW. Researcher Shim said, "There are no fixed initial quantities or royalties related to this contract. Considering Philip Morris's past IQOS sales trends, KT&G's expected sales after three years are estimated at 300 billion to 500 billion KRW. Assuming a conservative initial entry into 10 to 20 countries, the target market size is estimated at 1 trillion to 2 trillion KRW. This figure assumes 50% discount considering the awareness and early stage of 'Lil Fit' and 50% of the supply price."

Hana Financial Investment gave KT&G a 'Buy' investment opinion with a target price of 143,000 KRW. The closing price on the 29th was 95,100 KRW.

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