[Click eStock] Hankook Tire Faced Challenges in Both Production and Export... Recovery Expected in Second Half

[Asia Economy Reporter Lee Myunghwan] Hana Financial Investment announced on the 7th that it maintains a buy rating on Hankook Tire & Technology while lowering the target price from 53,000 KRW to 43,000 KRW, reflecting a downward revision in earnings.

Hana Financial Investment analyzed that Hankook Tire's fourth-quarter results last year fell significantly short of market expectations. The company's sales and operating profit recorded 1.89 trillion KRW and 88 billion KRW, respectively. Compared to the same period last year, sales increased by 7%, while operating profit decreased by 61%. The operating profit margin dropped by 8.2 percentage points from the previous year to 4.7%. Researcher Song Seonjae of Hana Financial Investment noted, "Although volume factors were negative, the top line grew as price and exchange rate factors compensated."

Hana Financial Investment attributed the decline in Hankook Tire's original equipment (OE) tire sales to the shortage of automotive semiconductors. Researcher Song explained, "Due to production disruptions at client companies caused by the shortage of automotive semiconductors and the strike at the Korean factory, OE sales decreased in most regions," adding, "Replacement tire (RE) sales in Korea and Asia also declined due to reduced market demand and supply disruptions caused by strikes and logistics issues."

Meanwhile, Hankook Tire announced on the 4th that it aims for double-digit sales growth in 2022. It also set a goal to increase the sales proportion of high-inch tires of 18 inches or larger to 42% this year.

Regarding this, Hana Financial Investment expressed concerns about continued cost burdens. Researcher Song said, "Opportunities include market price increases and high growth in electric vehicles, while threats include economic uncertainties and abnormal cost increases such as freight and material costs," analyzing, "Among cost factors, strike costs are expected to impact about 30 billion KRW in the first quarter, transportation costs will have a significant negative effect in 2022 due to accumulated freight increases, and raw material costs are expected to rise by the high single digits."

However, he added, "If only the negative variables pass, demand recovery, price increases, and improvement in the fundamental strength of mix upgrades are expected, so we anticipate earnings and stock price recovery mainly in the second half."

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