The author is an analyst of KB Securities. He can be reached at [email protected]. -- Ed. Maintain BUY,
The author is an analyst of KB Securities. He can be reached at [email protected]. — Ed.
Maintain BUY, target price of KRW90,000
We maintain BUY and TP of KRW90,000 on Kia Corp. Derived using the DCF model (8.2% WACC; 1.0% TGR), our TP represents 6.8x 12m fwd implied P/E, 0.87x P/B and has 40% upside (vs. Jan 19 close).
4Q22 preview: OP of KRW2.53tn (+115.1% YoY); 9.6% above market consensus
We revise up 4Q22E OP by 44.9% to KRW2.53tn (+115.1% YoY, +229.1% QoQ), which is 9.6% above the market consensus. The upward revision is attributable to (1) a smaller-than-expected increase in U.S. incentive payments, (2) reversal of warranty cost provisions stemming from KRW appreciation and (3) unit sales coming in 2.2% higher than expected.
2022E OP of KRW7.14tn (+40.9% YoY) attributable to favorable FX rates, easing competition, recovering unit sales
We forecast 2022 OP at KRW7.14tn (+40.9% YoY; +KRW2.07tn), with the surge driven by (1) favorable FX rates (+KRW2.1tn in OP), (2) easing competition, model mix improvement and price hikes (+KRW1.47tn in OP) and (3) rebounding unit sales (+KRW1.24tn in OP). The positives should outweigh the negatives, such as a jump in warranty costs (-KRW1.55tn in OP). We expect contribution margin per unit to be boosted by 19.5% YoY on the back of favorable FX rates and easing competition.
2023 forecast: OP at KRW6.2tn (-13.2% YoY); surge in unit sales needed to offset drop in contribution margin
We revise up 2023E OP by 6.0% to KRW6.2tn (-13.2% YoY), which is 19.6% below the market consensus. We see OP falling, as sluggish auto demand is expected to pressure automakers’ margins and cause an YoY drop in Kia unit sales. To negate this, Kia will need to increase unit sales by 9.6%.
news.google.com