[Click eStock] KT&G, Smoothly Selling Cigarettes

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 13th that it maintains a buy rating and a target price of 110,000 KRW for KT&G. This is due to the increase in KT&G's earnings.

Han Yoo-jung, a researcher at Daishin Securities, stated, "The full recovery of Korea Ginseng Corporation is expected to be delayed, but the domestic general cigarette market share is expected to continuously expand, and the domestic HNB market is anticipated to grow rapidly. It is positive that KT&G has proven its competitiveness by maintaining the number one market share in sticks, starting with devices centered on its independent platform." She added, "In the early stages of entering new countries, the proportion of devices is high, making an increase in cost ratio inevitable. However, as proven in the domestic market, the proportion of sticks is expected to gradually increase while the proportion of devices will decrease."

Furthermore, due to economies of scale, the manufacturing cost ratio of sticks is improving, and the cost ratio of devices is improving due to diversification of suppliers, so the profit contribution from overseas HNB is also expected to gradually expand. Compared to 2021, domestic and overseas HNB stick sales volume in 2022 is estimated to increase by more than 60%, with domestic sales increasing by more than 20% and overseas sales increasing by more than 100%. It is judged that from 2022, overseas sales volume will exceed domestic sales volume.

Meanwhile, KT&G's consolidated sales in the first quarter of this year were 1.4062 trillion KRW (a 16.1% increase), and operating profit was 333 billion KRW (a 6.3% increase), in line with the previous Daishin Securities estimated operating profit of 334.2 billion KRW. This exceeded the consensus operating profit of 312.5 billion KRW.

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