[Click eStock] "Hankook Tire Passed the Bottom in H1, Now Is the Time to Buy... Target Price Up"

[Asia Economy Reporter Lee Myunghwan] Hana Securities announced on the 3rd that it maintains a buy rating on Hankook Tire & Technology and has raised the target price from the previous 43,000 KRW to 50,000 KRW. This is due to the second-quarter earnings surpassing market expectations and the anticipated performance improvement in the second half of this year.

Hana Securities evaluated that although Hankook Tire's second-quarter earnings this year were weak compared to the same period last year, they were higher than the market's previously significant concerns. Hankook Tire's second-quarter revenue increased by 13% year-on-year to 2.04 trillion KRW, while operating profit decreased by 6% to 175.3 billion KRW. The operating margin fell by 1.8 percentage points to 8.6%.

Although volume declined by 9%, Hana Securities assessed that sales and exchange rate factors increased by 17.6% and 3.4% respectively compared to the same period last year, resulting in the highest quarterly revenue. By region, due to production disruptions at automakers, OE (Original Equipment) tire sales decreased in most regions except North America. However, thanks to price increases, RE (Replacement Equipment) tire sales in Korea, Europe, and North America grew, driving top-line growth.

Looking at product categories, the global high-inch tire proportion rose by 1.1 percentage points year-on-year to 39.1%, indicating an improved product mix. Hana Securities noted that the overall volume decline was offset by price increases, mix improvement, and exchange rate effects, leading to growth.

The raw material input cost rose 11% year-on-year to 1,937 USD per ton. Due to increases in raw material and freight costs, the cost of goods sold ratio rose by 2.0 percentage points, while the selling and administrative expense ratio decreased by 0.2 percentage points due to leverage effects from revenue growth, resulting in an operating margin decline of 1.8 percentage points year-on-year to 8.6%.

At the corporate briefing held on the 2nd, Hankook Tire explained that the current freight cost ratio relative to sales is about 12%. They forecast that freight costs will stabilize and decline in the second half but not sharply, remaining similar to or slightly lower than the first half. However, they expect freight costs to decrease next year due to a supply advantage in freight. Sales volume of tires for electric vehicles in the first half was 1 million units, with an annual forecast of 2.5 to 3 million units. They also projected an annual growth rate of over 30% for electric vehicle tires.

Researcher Song Seonjae of Hana Securities stated, "Earnings have passed the bottom in the first half. In the second half, major costs will stabilize, the effect of price increases will continue, and OE demand will recover due to increased production by customers, leading to expected earnings improvement." He added, "The current point, ahead of earnings recovery, is an opportunity to increase weighting."

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