[Click eStock] "Hankook Tire, Earnings Momentum Limited for Now... Target Price Down"

[Asia Economy Reporter Song Hwajeong] Hana Financial Investment downgraded the target price of Hankook Tire & Technology (hereinafter Hankook Tire) from 57,000 KRW to 53,000 KRW on the 2nd, citing limited performance momentum for the time being. The investment opinion was maintained as 'Buy.'

Song Seonjae, a researcher at Hana Financial Investment, explained, "The third-quarter earnings this year fell short of market expectations due to the slowdown in production by client companies and the surge in export freight costs, and since these effects are expected to continue, we have lowered our earnings estimates for this year and next year. Due to global bottlenecks causing a shortage of export vessels and prolonged logistics cost burdens, performance momentum is currently limited."

Hankook Tire's third-quarter earnings recorded sales of 1.83 trillion KRW, down 3% year-on-year, and operating profit of 180.8 billion KRW, down 20%. The operating profit was 7% below market consensus. Researcher Song analyzed, "While the price factor (8.2%) was positive, volume (-10.2%) and exchange rate (-1.0%) factors negatively impacted, leading to a contraction in scale. Overseas, due to production disruptions caused by a shortage of automotive semiconductors, OE (Original Equipment) tire sales decreased in most regions, and replacement (RE) tire sales in Korea, Europe, and China shrank due to reduced market demand and intensified competition."

The constraints on third-quarter performance are expected to affect the fourth quarter as well. Hankook Tire anticipates that external variables such as the shortage of automotive semiconductors and global logistics and transportation issues will continue to impose cost burdens on raw materials, logistics, and power, limiting profitability in the fourth quarter. To offset this, Hankook Tire plans to continue raising tire prices. Price increases have already been implemented in North America, Europe, and Korea in the third quarter, with an additional 3-5% price increase planned in advanced markets starting in October.

Researcher Song stated, "Despite cost burdens, the operating profit margin reached 9.9% in the third quarter, and it should be considered that these external variables are issues that can be overcome in the mid to long term. Recovery in demand, passing on cost increases through price hikes, and mix improvement due to the rising proportion of tires for electric vehicles and high-inch tires will support this."

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