[Click eStock] "Nexen Tire: Second Half Opportunities... Investment Rating Upgraded"

On August 19, Kiwoom Securities upgraded its investment rating for Nexen Tire to "Buy." The decision was based on expectations of improved performance, driven by the European Plant 2 achieving a 100% utilization rate and the expansion of domestic replacement tire (RE) supply.

Shin Yooncheol, a researcher at Kiwoom Securities, stated, "Nexen Tire’s European Plant 2 is accelerating its efforts, aiming to reach 100% utilization by the end of this year, up from about 75% at the end of the second quarter." He added, "Although the third quarter may see a seasonal dip in utilization due to the legally mandated two-week summer vacation in Europe, this has already been factored into the business plan, so there should be no disruption to production expansion."

He continued, "Due to the U.S. automotive parts tariff, which took effect on May 3, competitors are redirecting some of their U.S. export volumes to Europe, intensifying competition in the European RE market." He predicted, "However, since Nexen Tire’s European Plant 2 is mainly increasing production of original equipment (OE) tires, the direct impact is expected to be limited."

Performance improvements are also expected in the domestic market. Shin explained, "Due to the supply gap in the domestic tire market caused by the fire at the Kumho Tire Gwangju plant, Nexen Tire began expanding domestic OE supply to Hyundai and Kia from the second quarter." He added, "We also expect Nexen Tire’s domestic RE supply to increase starting in the second half of the year."

The company is also expected to benefit from the reduction in U.S. automotive parts tariffs. Previously, assuming a 25% tariff rate on U.S. automotive parts, Nexen Tire’s operating profit impact for the second half of this year was estimated at up to KRW 50 billion. However, if the rate is reduced to 15% from mid-September as a result of the Korea-U.S. trade negotiations, the impact is expected to be reduced to around KRW 30 billion.

Shin noted, "Among the three major domestic tire companies, Nexen Tire is the only one without a manufacturing plant in the U.S., so it stands to benefit the most from the tariff reduction." He added, "The effect of raising U.S. RE prices to pass on the tariff to consumers is also expected to be reflected in third-quarter results. Taking these opportunities in the second half into account, we are upgrading our investment rating."

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