The creator is an analyst of KB Securities. He could be reached at [email protected] — Ed.
Keep BUY, goal value of KRW90,000
We keep BUY and TP of KRW90,000 on Kia Corp. Derived utilizing the DCF mannequin (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 shut).
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 enhance in U.S. incentive funds, (2) reversal of guarantee value provisions stemming from KRW appreciation and (3) unit gross sales coming in 2.2% larger than anticipated.
2022E OP of KRW7.14tn (+40.9% YoY) attributable to favorable FX charges, easing competitors, recovering unit gross sales
We forecast 2022 OP at KRW7.14tn (+40.9% YoY; +KRW2.07tn), with the surge pushed by (1) favorable FX charges (+KRW2.1tn in OP), (2) easing competitors, mannequin combine enchancment and value hikes (+KRW1.47tn in OP) and (3) rebounding unit gross sales (+KRW1.24tn in OP). The positives ought to outweigh the negatives, reminiscent of a soar in guarantee prices (-KRW1.55tn in OP). We anticipate contribution margin per unit to be boosted by 19.5% YoY on the again of favorable FX charges and easing competitors.
2023 forecast: OP at KRW6.2tn (-13.2% YoY); surge in unit gross sales wanted to offset drop in contribution margin
We revise up 2023E OP by 6.0% to KRW6.2tn (-13.2% YoY), which is nineteen.6% under the market consensus. We see OP falling, as sluggish auto demand is anticipated to stress automakers’ margins and trigger an YoY drop in Kia unit gross sales. To negate this, Kia might want to enhance unit gross sales by 9.6%.
