[Click eStock] "Kia, Clear Profit Margin Improvement... Expectations Rise with Chip Shortage Resolution"

3Q Operating Profit 1.3 Trillion KRW... 580% Increase YoY

Kia EV6

[Asia Economy Reporter Minwoo Lee] Kia is showing signs of growth as its operating profit margin significantly improved in the third quarter of this year. As the shortage of automotive chips gradually eases, it is expected to actively increase its electric vehicle market share.

On the 3rd, IBK Investment & Securities maintained its 'Buy' rating and target price of 120,000 KRW for Kia, citing these factors. The closing price the previous day was 86,000 KRW.

Kia recorded consolidated sales of 17.7528 trillion KRW and operating profit of 1.327 trillion KRW in the third quarter of this year. Compared to the same period last year, sales increased by 8.77% and operating profit surged by 579.71%. These figures exceeded market consensus estimates by 5.03% and 6.14%, respectively. Global wholesale sales were 684,000 units, down 2% year-on-year, but excluding China, consolidated wholesale sales increased by 3%.

Lee Sanghyun, a researcher at IBK Investment & Securities, explained, "Operating profit surged about 580% compared to the same period last year, despite burdens such as raw material prices, due to the base effect from quality costs, a significant reduction in incentives in the North American market, and an increase in the proportion of RVs led by new SUV models." He added, "Accordingly, the operating profit margin improved by 6.3 percentage points year-on-year to 7.5%. Even excluding last year's third-quarter quality costs related to engines amounting to 1.2 trillion KRW, the operating profit margin improved by 0.1 percentage points."

The chip shortage issue, which has been a major concern recently, is likely to continue into the fourth quarter but is expected to gradually improve. Due to supply issues, deferred demand has occurred, and demand is expected to remain robust next year. The India plant is already pushing to increase production from two shifts to three shifts, and despite increasing Telluride production by 100,000 units, the U.S. plant is still facing a shortage of supply.

The researcher analyzed, "Although there were production disruptions due to chip shortages, the impact on sales was relatively less due to market share gains in the U.S. and Europe and the expansion effect of the India plant. The SUV mix ratio has increased, leading to improvements in average selling price (ASP) and product mix, and with the EV6 being actively introduced in the European market, an increase in electric vehicle market share is also expected."

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