[Inside the Stock] Kia Changes Emblem, Semiconductor Supply Shortage Was a 'False Alarm'

On the 25th, Surpassing Celltrion to Rank 10th in KOSPI Market Cap
Upward Trend to Continue in Second Half... "Recovery in New Car Demand in Advanced Markets Gradually Strengthening"

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Kia is dispelling concerns about production disruptions caused by the semiconductor supply shortage as it shows an upward trend. It is expected that emerging markets and electric vehicles will continue to rise in the second half of the year.

According to the Korea Exchange on the 28th, Kia closed the market at 89,500 won, down 1.32% (1,200 won) from the previous day. On the 25th, Kia closed at 90,700 won, up 0.11% (100 won) from the previous day, surpassing Celltrion to rank 10th in market capitalization on the KOSPI. Since the beginning of this month, Kia has risen 4.56%, showing a greater increase than the KOSPI (3.06%).

The reason Kia is showing an upward trend is due to expected solid performance. KB Securities forecast that Kia's operating profit in the second quarter of this year will reach 1.5283 trillion won, an increase of 952.8% compared to the same period last year. This exceeds the market consensus by 265.8 billion won.

Facing Vehicle Semiconductor Supply Issues... But Kia Performed Well

At the beginning of this year, Kia announced a major transformation by changing its company name and emblem, but the external environment in the second quarter was actually negative. This was due to vehicle semiconductor supply issues. Automobile production was halted for a long period due to COVID-19, and natural disasters such as the record cold wave in February, which cut power to the Texas plant, also occurred. Additionally, the production structure concentrated on Taiwan's semiconductor manufacturer TSMC caused prolonged bottlenecks. Whenever COVID-19 or power outage issues occur in Taiwan, semiconductor supply problems arise because other manufacturers have lower production capacity to compensate.

Semiconductor inventory was also insufficient. Most semiconductor inventory was consumed in the first quarter of this year, and increased production was expected to be supplied only after June at the earliest. This inevitably raised concerns about disruptions in finished vehicle production. Overseas research firm Auto Forecast Solutions projected a total of 3.66 million finished vehicles to face production disruptions by the end of the year, and consulting firm AlixPartners forecasted 3.9 million vehicles worldwide to be affected. In fact, Kia's monthly domestic plant production decreased from 134,536 units in March to 107,389 units in May.

However, despite the semiconductor supply issues, Kia is interpreted to have performed well. This means it was less shaken compared to other automakers. Kia's cumulative shipments from April to May were 454,620 units, matching KB Securities' previous estimate of 454,850 units. KB Securities researcher Kang Sung-jin explained, "Intermittent production stoppages are occurring, but these factors have already been reflected in Kia's profit outlook," adding, "The inventory reduction observed in major U.S. models is due to strong sales rather than shipment issues."

Upward Trend Continues in the Second Half... Led by Eco-friendly Vehicles and New Models

Kia is expected to continue its upward trend in the second half of the year. Eco-friendly vehicles are anticipated to have more stable performance compared to competitors. Amid consumer concerns over fires occurring in Hyundai Motor's electric vehicle Kona Electric (EV), Kia's electric vehicle Niro is gaining attention. The Niro has already contributed steadily to Kia's performance by selling over 100,000 units annually as an eco-friendly dedicated model. Hyundai Motor's electric vehicle sales approached 30,000 units in the fourth quarter of last year but fell below 25,000 units in the first quarter of this year. In contrast, Kia's electric vehicle sales have remained steady around 30,000 units since the third quarter of last year, showing little fluctuation in performance.

New models are also steadily gaining traction in global markets. In April, sales in emerging markets excluding China reached 332,000 units, a 51% increase compared to the same period last year. With the launch of the fifth generation Sportage, Kia has strengthened its presence in emerging markets. Not only in emerging markets but also in the U.S. market, performance is favorable. The Carnival, which sold only about 500 units per month in the first quarter, sold 2,750 units in the U.S. market as of last month due to the new model effect.

Under the favorable conditions of eco-friendly vehicles and new models, Kia's global market share is also increasing. Kia's global market share excluding China averaged around 3.7% from 2011 to 2019 but is expected to rise to about 5% this year. Even amid the COVID-19 pandemic last year, Kia increased its global market share excluding China to 4.7%, and the cumulative global market share from January to April this year remains at 4.9%. However, China, where performance is below expectations, remains a concern for Kia. According to provisional data, Kia's sales in China from April to May this year are expected to be 21,002 units, falling short of KB Securities' forecast of 41,085 units.

Meanwhile, securities firms are raising Kia's target stock price. On the 28th, Eugene Investment & Securities raised Kia's target price from 105,000 won to 125,000 won. KB Securities also raised the target price from 110,000 won to 120,000 won. Lee Jae-il, a researcher at Eugene Investment & Securities, predicted, "The recovery strength of new car demand in advanced markets is gradually increasing," and added, "Normalization of sales and production will also be achieved."

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