[Click eStock] "Kia Achieved Double-Digit Profit Margin... Expected to Remain Strong in the Second Half"

[Asia Economy Reporter Myunghwan Lee] Hana Securities announced on the 25th that it maintains a buy rating and a target price of 110,000 KRW for Kia. This is because Kia posted strong earnings in the second quarter of this year and is expected to continue solid performance in the second half.

Hana Securities evaluated that Kia's second-quarter earnings this year significantly exceeded market expectations. Kia's Q2 sales increased by 19% year-on-year to 21.9 trillion KRW, and operating profit rose by 50% to 2.23 trillion KRW. The operating profit margin increased by 2.1 percentage points from the same period last year to reach 10.2%. Hana Securities diagnosed that the negative impact of volume decline was offset by mix improvement and exchange rate gains, resulting in substantial top-line growth. The consolidated average selling price (ASP) was 31.4 million KRW, up 19% year-on-year, and the domestic ASP also rose 10% to 3.1 million KRW.

Looking at sales volume by region, sales were weak in three countries: South Korea (-5%), China (-49%), and Russia (-70%), while sales volume recovered in other countries such as North America (1%), Europe (1%), India (46%), the Middle East (10%), and Latin America (41%).

Hana Securities analyzed that price increases, vehicle mix improvement, and incentive reductions contributed positively. Thanks to the operating leverage effect, the gross profit margin rose by 2.2 percentage points year-on-year to 20.9%. Among the 747 billion KRW increase in operating profit, rising raw material costs (-195 billion KRW) and other cost increases (-281 billion KRW) were negative factors, while price increases (288 billion KRW), incentive reductions (527 billion KRW), and exchange rate gains (509 billion KRW) contributed positively. It was explained that the price effect contributed approximately 1.33 trillion KRW to operating profit.

In the conference call, Kia forecasted that production and sales would recover in the second half as semiconductor supply disruptions ease. Regarding this, Hana Securities expects solid profitability to be maintained due to strong waiting demand for top models, ongoing price increases, and trim upgrades.

Hana Securities predicted that the positive effects of mix and exchange rates, which were reasons for Kia's strong Q2 performance, will continue in the second half. Along with production and sales recovery, the second-half performance is also expected to be solid. Researcher Seonjae Song of Hana Securities analyzed, "Investors are concerned about a peak-out in earnings due to the possibility of rising incentives, but since there is strong waiting demand in the market, the pricing environment will not deteriorate sharply," adding, "Attention should be paid more to the earnings resilience as the volume recovery effect can offset this."

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