[Click eStock] Labor-Management Agreement Ends Uncertainty... Kia Motors Runs Again

U.S. Sales Also Enter Full Expansion Phase... "Stock Price Revaluation Will Begin"

On the morning of the 10th, one Kia Motors employee in Seo-gu, Gwangju was classified as a confirmed case of the novel coronavirus infection (COVID-19), leading to the suspension of operations at Plant 3. Meanwhile, workers on partial strike are leaving work after completing a 4-hour shortened shift. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Kia Motors' labor and management reached a tentative agreement on wage collective bargaining last week, removing uncertainties. Along with this, the full-scale launch of Sorento sales in the U.S. is expected to improve performance.

On the 28th, Ebest Investment & Securities maintained Kia Motors as the 'Top Pick' in the automobile sector with a target price of 75,000 KRW. The closing price on the previous trading day was 61,700 KRW.

The agreement between labor and management was cited as the biggest positive factor. Despite a stock price adjustment phase continuing over the past month due to uncertainties such as strikes and concerns over slowing European sales, the tentative agreement reached last week in the wage collective bargaining is judged to have eliminated future uncertainties. Although a final union member vote is scheduled for the 29th, considering the contents presented in the wage collective bargaining, such as restoring 30 minutes of overtime, it is highly likely to be approved. Researcher Woo-ung Yoo of Ebest Investment & Securities explained, "If approved, the annual wage increase cost is estimated at about 45 billion KRW, and actual strike losses, considering overseas market inventory adjustments, are estimated at about 35,000 units, with related operating losses estimated at around 124.2 billion KRW."

Additionally, Sorento sales have rapidly started this month in the U.S., a key overseas market, which is expected to remove previous uncertainties. In particular, the Georgia plant's operating rate is estimated to have exceeded 95% since this month. Starting with the new Sorento, electric vehicle (HEV) and plug-in hybrid electric vehicle (PHEV) models will also be added, and monthly sales are expected to reach around 14,000 to 15,000 units in the first quarter of next year.

Meanwhile, operating profit for the fourth quarter of this year is estimated at 1.1121 trillion KRW, an increase of 89.8% compared to the same period last year. While total wholesale sales increased by 7.9% compared to the previous quarter, foreign exchange losses of about 193.5 billion KRW from export sales are expected to be largely offset by a sales warranty provision reversal of about 150 billion KRW.

Researcher Yoo said, "The current stock price is trading at an undervalued level with a price-to-earnings ratio (PER) of 6.1 times based on 2021," and added, "As profit recovery efforts continue, a rapid stock price revaluation is expected to be realized."

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