[Click eStock] "KT&G, Full-Scale Turnaround Expected from Second Half"

Q1 Operating Profit Falls Short of Market Consensus
Nonetheless, Positive Indicators for Cigarettes and E-Cigarettes
"Operating Profit Turnaround Expected from Second Half"

NH Investment & Securities maintained a 'Buy' rating and a target price of 110,000 KRW for KT&G on the 10th, expecting a full-scale earnings improvement from the second half of the year. KT&G's closing price on the previous trading day was 91,500 KRW.

Joo Young-hoon, a researcher at NH Investment & Securities, said, "Consolidated sales and operating profit for the first quarter were 1.2923 trillion KRW and 236.6 billion KRW, respectively, falling short of market expectations," adding, "While the burden of rising manufacturing costs was anticipated, the larger-than-expected impact of one-time expenses and the sluggishness in the health supplement business segment caused the shortfall." He also stated, "According to the mid-to-long-term (2024?2026) shareholder return plan, the first phase of treasury stock cancellation was completed in the first half, and additional treasury stock purchases and cancellations (expected to be around 300 billion KRW) are planned for the second half, which is expected to offset the first quarter's weak performance."

There are several indicators supporting a positive outlook for the second half. Despite a shrinking domestic cigarette market, the domestic cigarette segment showed solid performance by increasing market share by 0.3 percentage points, and the overseas cigarette segment also saw significant sales improvement due to price hikes in key regions. The electronic cigarette (NGP) segment is also a key factor, with stick sales volume increasing both domestically and internationally.

Researcher Joo said, "Currently, a mid-to-long-term performance creation structure and a structural innovation project are underway," adding, "As the tobacco business segment centered on NGP continues to show favorable results, if health supplement sales recovery can accompany this, a full-scale operating profit turnaround is likely from the second half."

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