[Click eStock] KT&G, Momentum Reviving from the Second Half of the Year

Sangsangin Securities announced on the 17th that it maintains a Buy rating and a target price of 110,000 KRW for KT&G.

Researcher Kim Hyemi of Sangsangin Securities explained, "Although increased cost burdens and a performance base effect in the real estate sector are expected to act as profit-reducing factors throughout this year, normalization is anticipated from the second half following inventory adjustments in the Asia-Pacific region. Additionally, export sales are expected to turn around due to efforts to raise ASP in other regions." She added, "The company’s focus on expanding its tobacco business, including additional overseas NGP market entries and new domestic NGP product launches, is expected to continue." She further noted, "There is still an opportunity factor in the form of a domestic tobacco price increase. While short-term earnings decline may cause stock price stagnation, there is sufficient positive momentum after the second half."

For the second quarter consolidated results, sales of 1.3761 trillion KRW and operating profit of 256.7 billion KRW are expected. Despite solid performance in tobacco (cigarettes, NGP) and overseas health supplement sectors in the first half, the reflection of increased costs for raw tobacco and a decline in performance due to the completion of real estate development projects are identified as the main factors behind the decline in sales and profits.

By segment, KT&G’s standalone sales are expected to decrease by 8% year-on-year, and operating profit by 22%. Among these, tobacco sales are estimated to decline by 2%. Domestically, despite a decrease in total demand for conventional cigarettes, growth in the NGP market (around 10%) is expected to drive an increase. However, overseas exports are expected to decline due to inventory adjustments in the Asia-Pacific region despite growth focused on new markets (Latin America, Africa, etc.). Real estate sales are estimated to decrease by 52% following the completion of the Suwon project.

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