[Click eStock] KT&G, Korea's Top-Level Shareholder Return Policy

NH Investment & Securities announced on the 4th that it maintains a Buy rating and a target price of 110,000 KRW for KT&G. This is based on the judgment that the company's mid- to long-term corporate value will increase due to its top-tier shareholder return policy in Korea.

Joo Young-hoon, a researcher at NH Investment & Securities, stated, "Although the second-quarter earnings fell short of market expectations, we positively evaluate the strengthened shareholder return policy, including the semi-annual dividend and the treasury stock cancellation implemented for the first time in 14 years."

KT&G announced a semi-annual dividend and a treasury stock repurchase and cancellation at the beginning of the year. The semi-annual dividend, starting for the first time in history, was set at 1,200 KRW per share. According to the researcher, this represents about 23% of the estimated total annual dividend amount. The treasury stock repurchase volume is 3.47 million shares (2.5% of issued shares, worth approximately 288.4 billion KRW), and all repurchased shares will be promptly canceled upon completion. Additionally, a mid- to long-term shareholder return policy to be applied from 2024 onwards is expected to be announced in the fourth quarter. The researcher estimated, "We expect the announcement of an even more strengthened shareholder return policy, including continuous upward trends in dividends per share and treasury stock repurchases and cancellations," emphasizing, "Although the earnings showed somewhat disappointing results, considering the top-level shareholder return policy in Korea, mid- to long-term corporate value growth is anticipated."

Meanwhile, on a consolidated basis for the second quarter, sales and operating profit were 1.336 trillion KRW (-6%) and 242.9 billion KRW (-26% year-on-year), respectively, falling short of both consensus and NH Investment & Securities' lower estimates. The main reasons were margin decline due to increased tobacco manufacturing costs and the completion of the Suwon real estate project. In the domestic tobacco segment, total cigarette demand decreased, but sales remained similar to the previous year due to the expanded penetration rate of NGP (Next Generation Products). Despite competitors launching new products, the NGP market share remained high at 47.4%, which is positive. The KGC segment recorded somewhat disappointing results due to sluggish domestic sales and increased marketing expenses in overseas operations.

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