[Click eStock] Kia, Operating Indicators Up = Earnings Up = Target Price & Stock Price Up

[Asia Economy Reporter Lee Seon-ae] Meritz Securities announced on the 5th that it maintains a 'Buy' rating on Kia and raises the target price from the previous 130,000 KRW to 140,000 KRW. This reflects the continued strong improvement trend in operating indicators, diagnosing the current moment as an attractive buying opportunity.

Kia's global wholesale sales (excluding China) have already surpassed the 2019 level, when the impact of COVID-19 was absent (average monthly sales in the first half of 2021: 230,000 units vs. average monthly sales in 2019: 211,000 units). Korea has recorded its highest market share since 2012, while the United States and India continue to achieve their highest market share ever.

With a sustained high demand environment, inventory is insufficient. The phenomenon of 'retail sales exceeding shipment sales' continues, and global and U.S. inventories are at their lowest levels since 2013 and 2014, respectively. An improvement trend in gross profit margin through increased operating rates and sales price hikes is easily anticipated.

Global wholesale sales in the second quarter reached 718,000 units, an increase of +8.5% compared to the previous quarter. Accompanied by significant increases in both sales volume and sales price, second-quarter revenue and operating profit are expected to rise by +11% and +37% respectively from the previous quarter, reaching 18.3 trillion KRW and 1.48 trillion KRW. These figures are +5% and +14% higher than the current consensus. In particular, the semiconductor shortage issue is expected to ease in the second quarter, leading to a full-scale increase in operating rates. The excess demand situation is maintained, and the upward trend in sales prices is also expected to continue. Accordingly, annual revenue and operating profit for this year are projected at 72 trillion KRW and 5.53 trillion KRW, respectively, which are +3% and +14% higher than the current consensus.

Researcher Kim Jun-sung of Meritz Securities explained, "Reflecting better-than-expected performance, we raise the fair stock price to 140,000 KRW," adding, "This applies a price-to-earnings ratio (PER) of 12 times based on the global standard to the adjusted earnings per share (EPS) for this year’s average."

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