[Click eStock] "KT&G Starts Export Normalization...Expecting Strong Performance in Second Half"

[Asia Economy Reporter Park Jihwan] Kiwoom Securities on the 9th presented a 'Buy' investment rating and a target price of 107,000 KRW for KT&G, stating that as exports to the Middle East normalize, performance momentum is expected to improve in the second half of the year.

Park Sangjun, a researcher at Kiwoom Securities, analyzed, "Recently, cigarette exports to the Middle East have been steadily recovering, and market share in the domestic cigarette market is also rising, so performance improvement momentum is expected to strengthen as we move into the second half of the year."

Although sales of cigarettes and red ginseng through duty-free channels remained sluggish in the second quarter due to the impact of COVID-19, it was judged that achieving profits similar to the same period last year would be possible, supported by an increase in domestic cigarette market share, recovery of cigarette exports to the Middle East, and expansion of real estate sales profits.

Researcher Park Sangjun evaluated, "Electronic cigarette exports are expected to begin in the second half of this year," adding, "While the initial profit contribution may be low, it is positive news in terms of overseas sales expansion."

KT&G attracted market attention regarding the possibility of electronic cigarette exports when it disclosed in January this year the signing of a sales supply contract with Philip Morris for HNB and E-Vapor products. It is analyzed that due to the spread of COVID-19, Philip Morris faced difficulties in marketing new products, which limited the impact of expectations for electronic cigarette exports on the stock price.

Researcher Park stated, "The possibility of KT&G starting electronic cigarette exports in the second half of the year seems to be opening, but to achieve meaningful performance improvement, it is estimated that securing export sales volume of at least 14 billion units will be necessary."

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