[Click eStock] "Kumho Tire Recovers Normal Profitability... Target Price Up"

Kumho Tire CI (Photo by Kumho Tire)

On the 30th, IBK Investment & Securities raised the target price for Kumho Tire to 6,100 KRW, stating that the company "has recovered profitability to a normal level with an increase in annual operating profit." However, considering the limited upside potential, the investment rating was lowered from 'Buy' to 'Trading Buy' (short-term buy).

On the same day, Lee Sang-hyun, a researcher at IBK Investment & Securities, said, "Kumho Tire's recent consolidated operating results for the third quarter showed an operating profit of 96.2 billion KRW, a 4,050% increase compared to the same period last year, and an operating profit margin of 9.8%, up 9.6 percentage points, exceeding market expectations. Although sales remained flat, the decline in transportation costs and input costs contributed to a rapid recovery to normal profitability levels."

In particular, the proportion of transportation costs to sales improved by 9.2 percentage points to 6.8%, compared to 16.0% in the same period last year. Fourth-quarter sales are expected to exceed 1 trillion KRW again. From the third quarter, Kumho Tire began supplying original equipment (OE) tires to leading global electric vehicle manufacturers, and there are increasing demand factors such as winter tire demand. Profitability is expected to maintain an operating profit margin around 9%, supported by the stable downward trend in transportation and input costs. The researcher evaluated, "The increase in annual operating profit this year is significant as it marks the first year of normalization, settling into a net profit structure even after considering net interest expenses."

The completion of a three-year expansion of the Vietnam factory is also expected to improve production capacity. Lee said, "The expansion will increase production capacity from the existing 5.9 million units to 12.5 million units by early next year, adding 6.6 million units, which corresponds to roughly a 10% increase in total production capacity." He added, "The Vietnam factory enables circumvention of North American anti-dumping duties for exports and serves as a forward base for exports to Southeast Asia. Additionally, the latest factory benefits from labor cost advantages, which will greatly contribute to growth and profit improvement next year." He also noted, "Although there has been little progress on relocating the Gwangju factory, ongoing discussions with Gwangju City and others are understood to be continuing."

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