[Click eStock] "Hankook Tire & Technology, Q4 Operating Profit Expected to Decrease 51.7% YoY"

Prolonged Strike...Lower Factory Operating Rate and Increased Labor Cost Burden
Shinhan Financial Investment "Kumho Tire & Technology Target Price Remains"

[Asia Economy Reporter Gong Byung-sun] There are forecasts that Hankook Tire & Technology's fourth-quarter performance last year will be sluggish. It is interpreted that the lowered factory operating rate due to the strike and the burden of labor costs are affecting the performance.

On the 21st, Shinhan Financial Investment estimated Hankook Tire & Technology's fourth-quarter sales last year to be 1.6 trillion KRW, down 7% from the same period last year, and operating profit to be 109.8 billion KRW, down 51.7% during the same period. This is 10.91% and 37% below the respective market consensus.

The strike that began on November 24 last year acted as a negative factor. While the decrease in new car tires (OE) volume and freight burden remain, the strike was prolonged and ended on the 19th of last month. The domestic factory operating rate last month is estimated to have fallen below 50% due to the strike. In addition, the agreement including a 6% wage increase, a performance bonus of 5 million KRW, and a settlement payment of 2 million KRW is expected to increase the labor cost burden.

The poor performance is expected to continue until the first quarter of this year. The logistics issues that were problematic throughout last year remain, and operating inventory has been depleted due to the prolonged strike. Researcher Jung Yong-jin of Shinhan Financial Investment said, “Even if production normalizes in the first quarter, it will take time to accumulate local operating inventory,” and “The additional increased cost burden until the first quarter will be offset by price increases during the first half of this year.”

Accordingly, Shinhan Financial Investment maintained its 'Buy' investment opinion on Hankook Tire & Technology but lowered the target stock price by 18% from the previous 55,000 KRW to 45,000 KRW. Researcher Jung explained, “If the core business performance improves visibly in the second half and freight stabilizes, profitability will recover to past levels,” but “However, the aftereffects of the strike and high freight will continue until the first half.” The closing price on the previous day was 36,450 KRW.

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