[Click eStock] "Kumho Tire, Earnings Recovered to a Level That Can Drive Stock Price... Target Price Up"

Shinhan Investment Corp. raised the target price for Kumho Tire from 5,000 KRW to 7,000 KRW on the 31st, viewing that its earnings have recovered to a level that can drive the stock price. The investment opinion was maintained as 'Trading Buy'.

Jung Yong-jin, a researcher at Shinhan Investment Corp., stated, "Considering the expansion of high-inch tire sales, the expansion of the Vietnam production base with high cost competitiveness, and orders for new electric vehicle tires (OE), the improvement in return on equity (ROE) to around 10% has been completed." He explained, "Previously, the stock price moved based on event-driven factors such as the development of the Gwangju site due to unstable financial structure and profit volatility, but now earnings have recovered to a level that drives the stock price."

Kumho Tire's Q4 earnings last year showed significant improvement with sales increasing 12% year-on-year to 1.1 trillion KRW and operating profit soaring 711% to 149.5 billion KRW. Researcher Jung analyzed, "This is a strong performance exceeding market expectations (104.2 billion KRW) by 44%. Approximately 30 billion KRW of one-time gains were included due to the reversal of some costs that were preemptively reflected in response to the US anti-dumping tariff ruling, but even excluding these one-time gains, the results surpassed the consensus (average securities firm forecast) by 15%." Domestic and European sales drove the performance. Domestic sales increased 7% to 266.3 billion KRW, with the proportion of high-inch tires rising to 50.1%. European sales grew 24% to 256.6 billion KRW.

Shinhan Investment Corp. forecasts Kumho Tire's earnings this year to reach sales of 4.4 trillion KRW, up 9% year-on-year, and operating profit of 431.5 billion KRW, an 11% increase. Researcher Jung said, "For Kumho Tire, the trigger for this year's performance is volume," adding, "The expansion effect in Vietnam will allow an increase in exports to the high-margin North American market." The production capacity of the Vietnam plant is being expanded from 5.9 million units in 2022 to 9 million units in 2023, and 12.5 million units this year. Accordingly, Vietnam's share of global production capacity will expand to 20% this year.

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