[Click eStock] Kia, 8.8% Amazing Profit Margin "Only Stock Price Response Remains"

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[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment announced on the 26th that it maintains a buy rating and a target price of 110,000 KRW for Kia. It was also presented as the top pick within the industry.

Song Seon-jae, a researcher at Hana Financial Investment, explained, "Based on the current stock price, the price-to-earnings ratio (PER) is below 6 times, and considering the favorable earnings and the increasing proportion of electric vehicles, we present it as the top pick in the industry."

First-quarter earnings exceeded market expectations as price increases, incentive reductions, and exchange rate effects offset stagnant volume. Future earnings are also expected to be strong.

Although Kia will face parts supply disruptions after the second quarter, the related impact is diminishing, and it is judged that production can be aligned with planned levels in the second half of the year. Regarding the Russia-Ukraine war, there will be an impact of 50,000 to 100,000 units, but exports of parts to Russia are being redirected to other regions, which is evaluated to positively contribute to production increases in more profitable regions and per-unit profitability. Raw material price increases will become more significant after the second quarter, and considering lead times, the impact is expected to grow in the second half. Overall, despite negative factors such as volume disruptions, rising raw material costs, and increased labor costs, the guidance presented at the beginning of the year (operating profit of 6.5 trillion KRW) remains valid due to incentive reductions and exchange rate effects.

Researcher Song emphasized, "Despite negative factors such as parts supply disruptions and rising raw material prices, strong demand backlog, low incentives, and exchange rate increases will sustain solid earnings. If semiconductor supply stabilizes, the effect of volume increase will also come into play, making it possible to achieve the company's operating profit target of 6.5 trillion KRW this year."

Meanwhile, regarding the electric vehicle factory in the United States, the plan is to convert lines in existing internal combustion engine plants to electric vehicles rather than building a dedicated factory, but specific plans are still undecided. The conversion of the China plant into an export base is also under consideration.

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