[Click eStock] "Kia Expected to Break Record for Highest Operating Profit in Q2"

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] Korea Investment & Securities maintained its buy rating and target price of 135,000 KRW for Kia on the 11th, expecting a surprise performance in the second quarter.

The expected operating profit for the second quarter is 2.2464 trillion KRW, projected to grow 3% year-on-year. This exceeds market expectations by 29%. Considering that the expected sales price for the second quarter is 9.5% below and the sales revenue is 0.7% short of market forecasts, the strong operating profit is expected to stand out even more.

Researcher Jinwoo Kim said, “The quarterly operating profit recorded in the first quarter was 1.6 trillion KRW, the highest ever, and it is highly likely to be surpassed again in the second quarter.”

The strong performance is estimated to have been contributed more by the reduction in incentives than by exchange rates. The increase in operating profit due to the average exchange rate is expected to be 310.8 billion KRW, while the increase in sales warranty provisions (operating profit decrease) due to changes in the year-end exchange rate is expected to be 196.3 billion KRW. The increase in operating profit from incentive reductions is projected to be a record high of 640.9 billion KRW. This is because incentives per vehicle in the US sharply dropped by 76% in the second quarter, directly leading to profit growth.

Researcher Jinwoo Kim emphasized, “Kia’s popularity in the US has gone beyond incentive reductions to the point where dealers are demanding premiums,” adding, “Rather than worrying about the peak in performance, attention should be paid to the level of normalized performance after the peak.”

He continued, “Among competitors in the US, Kia uses the least incentives while expecting market share growth,” analyzing, “It is time to focus on structural market share improvement through new model launches and brand value enhancement.”

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