[Click eStock] "Kia, Record-Breaking 2Q Performance... Expecting Volume Recovery in 2H"

[Asia Economy Reporter Myunghwan Lee] DB Financial Investment announced on the 12th that it maintains a Buy rating and a target price of 120,000 KRW for Kia. This is because Kia is expected to deliver record-breaking earnings in the second quarter of this year, surpassing market expectations.

DB Financial Investment forecasts Kia's second-quarter sales this year to increase by 16% year-on-year to 21.2382 trillion KRW, and operating profit to rise by 55% to 2.3086 trillion KRW. The operating profit is expected to significantly exceed the market consensus of 1.7395 trillion KRW, according to DB Financial Investment. Although the wholesale price on a consolidated basis slightly decreased compared to last year, sales increased in key regions such as the United States, Europe, Africa & Middle East, and India.

Incentives in the U.S. also recorded 638 USD, down 75% from the previous year. This is about half compared to the previous quarter, and along with a favorable KRW-USD exchange rate, it is expected to drive profitability improvement, DB Financial Investment said. Considering Kia's price increases for new cars in major regions, profitability per unit is also expected to improve compared to the previous quarter.

DB Financial Investment expects the strong wholesale sales in Kia's key regions to continue through this year. This is because inventory levels in Korea and the U.S. are extremely low, while order backlogs remain high. Production disruptions among major competitors in North America and Europe are ongoing, so incentives are expected to stabilize downward at least until the end of this year. Kia's factory sales recovered from a low of 210,000 units in February to around 250,000 units. Even if incentives increase in the second half compared to the first half and the Korean won strengthens, the volume increase is expected to mostly offset the negative factors on profitability.

DB Financial Investment said it is raising its operating profit estimate for Kia this year by 11% from the previous forecast, considering the effects of higher-than-expected exchange rates, incentives, and average selling price (ASP) increases. Kim Pyeongmo, a researcher at DB Financial Investment, analyzed, "Concerns over production disruptions continue, leading to a prolonged slump in global auto sector stock prices," but added, "Kia is enjoying the highest ASP increase effect among global automakers based on relatively stable production."

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