[Click eStock] "Kia, Favorable Exchange Rates and Incentives... Volume Expansion Expected"

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[Asia Economy Reporter Hwang Yoon-joo] Daishin Securities analyzed on the 6th that Kia is highly likely to revise upward its Q3 sales estimates considering the exchange rate and incentives for the third quarter. Accordingly, it maintained a 'Buy' investment rating and a target price of 120,000 KRW.

Researcher Kim Gwi-yeon of Daishin Securities stated, "We estimate Q3 sales at 22.1 trillion KRW and operating profit at 1.9 trillion KRW." The estimates assume an exchange rate of 1,294.1 KRW and sales volume of 762,000 units.

Researcher Kim evaluated the flow of exogenous variables such as exchange rates and incentives as favorable. He judged, "Considering tight supply and low inventory levels, the sharp incentives in the first half are limited."

Researcher Kim added, "A full-scale volume expansion is expected from Q4," and "The annual sales volume for 2022 is expected to be in the high 2.9 million units range."

On the cost side, he diagnosed, "Considering the peak of raw material prices and price increases, the proportion of raw materials relative to sales in the second half is expected to be similar to that in the first half."

The biggest concern, the U.S. 'Inflation Reduction Act' issue, seems to be finding a breakthrough.

Researcher Kim explained, "The volume eligible for 100% subsidy is estimated to decrease from 11,000 units in 2023 to 6,000 units in 2024," and "Considering the subsidy non-applicable volume or subsidy conditions for Kia's eco-friendly vehicles, the factors lowering competitiveness will be limited."

Kia plans to specifically update its supply chain reorganization plan within the U.S. according to battery-related regulations.

Regarding the possibility of steel price increases in the second half, it is expected to depend on the negotiation results. Depending on the negotiation outcome, the expected peak timing of Kia's raw material burden (July) may change.

Regarding eco-friendly vehicle demand due to rising electricity prices in Europe, he added, "The movement after the reduction of European eco-friendly vehicle subsidies in 2023 is expected to act as an important variable."

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