[Click eStock] "Kumho Tire, undervaluation appeal to increase upon announcement of new European plant investment"

On the 25th, KB Securities evaluated that Kumho Tire's undervaluation attractiveness would increase if an investment in a new local factory in Europe is announced. No investment opinion or target price was provided.

Image courtesy of Kumho Tire

Hyunkyum Kim, a researcher at KB Securities, stated, "Consolidated sales for the second quarter are expected to increase by 8.4% year-on-year to 1.09 trillion KRW, and operating profit for the same period is expected to rise by 63.3% to 143.9 billion KRW." He added, "The background of such favorable performance includes profitability improvement due to the stabilization of the Vietnam factory and mix improvement from an increased proportion of high-inch tires." He further analyzed, "The estimated operating profit margin of 13.2% for the second quarter is the highest quarterly operating profit margin, indicating a positive current operating environment."

Researcher Kim pointed to the possibility of investment in a new factory in Europe as a factor that could increase corporate value. He explained, "The European market has traditionally been centered on small cars, but the proportion of electric vehicles is rapidly increasing, which deserves attention. Electric vehicles are mostly equipped with high-inch tires of 18 inches or more to support vehicle weight and high performance compared to internal combustion engine vehicles, so the expansion of the electric vehicle proportion leads to profitability improvement."

He continued, "This year, Kumho Tire plans to launch a new electric vehicle tire brand and expand the proportion of electric vehicle (EV) tires from about 9% last year to over 16%, which is also related to sales expansion in the European region." He predicted, "If an investment in a new local factory in Europe is announced, Kumho Tire's undervaluation attractiveness will increase."

However, the overhang issue (potential large-scale sell-off) of creditor shares is a risk factor. Researcher Kim pointed out, "Recently, the restriction on the sale of 23% of creditor shares has been lifted, raising concerns about the overhang issue."

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