[Click eStock] KT&G, Reliable Earnings and Stock Price "Target Price Raised"

[Asia Economy Reporter Lee Seon-ae] DB Financial Investment has maintained a buy rating on KT&G and raised the target price from 110,000 KRW to 124,000 KRW, an increase of 12.7%. This adjustment reflects an upward revision of the 2023 estimates considering positive changes in business operations, leading to a higher target price based on improved earnings forecasts.

Jaeheon Cha, a researcher at DB Financial Investment, stated, "The recovery of underperforming business segments such as exports and duty-free sales, along with proactive shareholder value enhancement policies like share buybacks and dividend increases, are expected to positively impact the stock price." He added, "Given the increasing uncertainties in the stock market, KT&G is expected to serve as a safe haven, so we continue to maintain a buy rating on the company."

KT&G's sales in the third quarter of this year reached 1.62 trillion KRW, up 3.3% year-on-year, while operating profit decreased by 4.3% to 405.6 billion KRW. Sales exceeded the company's estimates by 5.1%, driven mainly by increased sales from Insamgongsa, recovery in export cigarettes, growth in electronic cigarette exports, overseas subsidiary growth, and recovery in the duty-free channel. Operating profit was nearly in line with estimates and, excluding one-off factors, is entering an improving trend compared to the previous year.

Pre-tax profit increased by 31.1% due to foreign exchange gains from the rise in the KRW-USD exchange rate. Although temporary, net income attributable to controlling shareholders recorded a positive performance, exceeding estimates by 56.1%. The domestic cigarette market share stood at 65.2%, slightly improved from the previous year, and is expected to continue a steady upward trend based on successful new product launches and brand strength rising against foreign competitors.

The market share of electronic cigarettes also reached 48.5%, and KT&G is expected to maintain its leadership in the domestic market. Sales volume growth of overseas subsidiaries in new markets such as Indonesia continues at a high rate, and overseas sales are expected to keep increasing due to exchange rate effects. Insamgongsa is also expected to sustain a favorable operating profit turnaround due to recovery in duty-free demand, growth in the Chinese export market, and a reduction in home shopping programming share.

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