[Click eStock] "KT&G, Export Recovery to the Middle East... Full-Scale Performance Recovery"

Hana Financial Investment Report

Q4 Operating Profit 340 Billion KRW... 35% Increase YoY
Dividend Expected to Rise This Year, Estimated at 4600~4800 KRW Range

[Asia Economy Reporter Minji Lee] Hana Financial Investment expressed on the 18th that KT&G is expected to deliver strong performance next year as well due to the recovery of exports to the Middle East. The investment opinion was maintained as Buy, with a target price of 103,000 KRW.

Consolidated sales and operating profit for the 4th quarter are estimated at 1.2813 trillion KRW and 340 billion KRW respectively, representing increases of approximately 7.1% and 34.7% compared to the same period last year. The faster recovery of exports to the Middle East is expected to have boosted the company's overall performance.

Total domestic cigarette demand (combustible + heated tobacco products) in the 4th quarter is estimated to have decreased by 5% year-on-year, considering the reduction in business days. Combustible cigarette demand is expected to have declined by 4%. Accordingly, KT&G's domestic market share is anticipated to have decreased by 0.1 percentage points year-on-year and 0.9 percentage points quarter-on-quarter to 64%.

Exports of cigarettes excluding the United States are estimated to have increased by 30% year-on-year. According to Korea Customs Service data, cumulative cigarette exports in October and November rose by approximately 43.1% compared to the same period last year. Eunju Shim, a researcher at Hana Financial Investment, stated, “Since the second quarter, exports to the Middle East have accelerated, leading to a sharp recovery in volume,” adding, “New markets are also recovering as they emerge from COVID-19-related lockdowns.” Overseas subsidiaries are expected to continue double-digit growth in the 4th quarter, driven by strong sales in the U.S., and KGC's operating profit is estimated at 5 billion KRW.

Next year, KT&G's consolidated sales and operating profit are expected to reach 5.6268 trillion KRW and 1.6229 trillion KRW respectively, representing increases of 7.3% and 9.3% year-on-year. This is because the recovery of exports to the Middle East and new markets is becoming visible, leading to improved performance next year. Researcher Shim said, “The partnership with PM on heated tobacco products will show significant effects next year,” and added, “Domestic cigarette market share is expected to remain around 64%, supported by increased awareness of new products.” Additionally, sales from real estate development in Suwon are expected to contribute 550 billion KRW.

This year’s dividend per share is expected to increase. According to shareholder policy, this year’s DPS is estimated to be at least 4,600 KRW, up by a minimum of 200 KRW. Researcher Shim explained, “Considering the profits from real estate sales in Suwon, dividends are expected to increase by 200 KRW,” and added, “Given that performance recovery is gaining momentum, buying at a low price is valid.”

This content was produced with the assistance of AI translation services.