[Click eStock] Kia, Period of High Earnings

[Asia Economy Reporter Lee Seon-ae] IBK Investment & Securities announced on the 27th that it maintains a Buy rating and a target price of 120,000 KRW for Kia.

Lee Sang-hyun, a researcher at IBK Investment & Securities, stated, "In the second quarter, Kia achieved record-high sales and operating profit, and the operating profit margin recorded an encouraging double-digit figure for the first time ever. Although the reflection of the highest raw material prices is expected in the third quarter, and there are concerns about expanded incentives due to the economic downturn next year, we expect that the high level of performance matching the increased market share and product competitiveness will be maintained."

The second quarter results of 2022 showed sales of 21.9 trillion KRW (a 19% increase), operating profit of 2.2 trillion KRW (a 50% increase), and an operating profit margin of 10.2% (an increase of 2.1 percentage points). The consensus exceeded operating profit by 22%. The scale of sales and operating profit renewed record highs following the first quarter. In particular, the operating profit margin recorded double digits for the first time ever.

Wholesale sales showed a slight decline compared to the same period last year, but with gradual improvement in semiconductor supply, the average monthly production volume in the second quarter recovered to about 250,000 units, continuing the improving trend compared to the previous quarter in both the first and second quarters. As the impact of the decrease in sales volume subsided, sales increased by 19% due to rising ASP and exchange rates. Looking at the factors affecting the increase and decrease in operating profit in the second quarter, there were negative impacts such as a decrease in the proportion of high-margin RV sales due to chip shortages, rising raw material prices, and increased warranty costs due to exchange rate increases. On the other hand, positive effects such as ASP increase, incentive reduction, and exchange rate rise played a significant role, resulting in an overall increase in operating profit.

Meanwhile, with the launch of the EV6, EV sales in advanced markets are rapidly expanding. Eco-friendly vehicle sales in the second quarter reached 133,000 units, a 79% increase compared to the previous year. As sales of the EV6 and the second-generation Niro EV began in earnest, the EV sales ratio in the domestic market reached 10%. In Europe and the United States, the sales ratios are also increasing to 13% and 6%, respectively. This quarter, the domestic sales ratio recorded 32%, and the U.S. sales ratio also reached 23%, showing diversification. Researcher Lee said, "In the case of the EV6, production capacity expansion is being pursued in the second half of the year, and together with the second-generation Niro EV, it is expected to contribute to expanding Kia's EV market share." He added, "Also, the EV9 electric vehicle to be launched in the first half of next year will be Kia's first SUV electric vehicle and a flagship model, and its high selling price (targeting the high $50,000s to $70,000 in the U.S. market) will serve as a barometer to see if it will be accepted in the market."

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