[Click eStock] Kia, Doubts Over Net Profit Growth This Year... Target Price Lowered to 110,000 Won

[Asia Economy Reporter Hwang Yoon-joo] Meritz Securities downgraded the target price for Kia to 110,000 KRW on the 27th, considering the delayed improvement in the operating environment this year and the capital erosion of its Chinese subsidiary. However, the investment opinion was maintained as 'Buy'.

Junseong Kim, a researcher at Meritz Securities, stated, "For Kia's 2022 earnings guidance to be met, it is necessary to confirm the early normalization of semiconductor procurement, which differentiates it from global competitors, and an increase in the average selling price (ASP) (a decrease in incentives) starting from the beginning of the year."

Researcher Kim analyzed, "The potential goodwill impairment loss of the Chinese subsidiary, which entered capital erosion in the fourth quarter of 2021, should remain at a limited level. Even if operating profit improves, if the deficit in China expands, earnings per share (EPS) growth will be reduced."

He added, "Considering the capital erosion of the Chinese subsidiary, the 2022 EPS estimate is adjusted downward by -4.2%."

Meanwhile, Kia's sales in the fourth quarter of 2021 increased by 1.6% year-on-year to 17.188 trillion KRW, while operating profit decreased by 8.3% year-on-year to 1.175 trillion KRW. These figures were 3% and 14% below consensus, respectively.

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