[Click eStock] "K Car, Slower-than-Expected Sales Growth... Target Price Down"

Shinhan Investment Corp. has lowered the target price for K Car from 22,000 KRW to 20,000 KRW, reflecting slower-than-expected revenue growth compared to previous estimates. The investment rating remains at 'Buy.'

On the 19th, Shinhan Investment Corp. projected that K Car's revenue for the second quarter of this year would decrease by 9.3% year-on-year to 533 billion KRW, while operating profit is expected to increase by 40% to 16 billion KRW.

Researcher Kim Byung-soo of Shinhan Investment Corp. stated, "The number of used car transactions in the domestic market in Q2 decreased by 3.8% from the previous quarter to 601,547 units, which is disappointing considering the peak season. Due to a conservative inventory policy, it is believed that expanding market share and increasing the average selling price (ASP) were difficult, estimating retail sales to have increased by 3.0% from the previous quarter to 516.6 billion KRW."

The operating profit margin is expected to improve to 3%, up 1.1 percentage points from the same period last year, indicating enhanced profitability. Researcher Kim said, "The main factors for profitability improvement are an inventory composition focused on low-priced cars with good profitability, AI algorithm-based pricing policies, and an increased proportion of e-commerce sales. This marks a departure from the declining profitability trend since 2021."

For the third quarter, revenue is forecasted to increase by 3.6% year-on-year to 596.8 billion KRW, and operating profit is expected to rise by 23.0% to 19.7 billion KRW. Kim explained, "With macroeconomic uncertainties easing, plans are in place to expand inventory and normalize inventory composition in the second half. We expect to enter a phase of ASP growth and market share expansion, and the profitability improvement efforts concentrated in the first half will be reflected through operating leverage."

The stock price is expected to recover in line with top-line growth in the second half. Researcher Kim noted, "We have lowered the target price by 9% from previous estimates to reflect slower revenue growth. Global peers are undergoing valuation rerating due to easing concerns over interest rate hikes, and the stock price is expected to recover as top-line growth is confirmed in the second half."

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