Shinhan Investment & Securities lowers target stock price to 195,000 won due to poor Kia performance in the third quarter

(Seoul = Yonhap News) Reporter Kim Yu-hyang = Shinhan Investment & Securities lowered the target stock price of Kia [000270] from 240,000 won to 195,000 won on the 29th, saying that its performance in the third quarter of this year will fall below market expectations. The investment opinion was maintained at 'buy'.

Researcher Gwang-rae Park said, “We expect Kia’s operating profit in the third quarter to be 2.31 trillion won, which is lower than market expectations.”

The reason for lowering the performance estimate was the burden of raw materials. Researcher Park explained, “Aluminium, battery materials, and oil prices peaked in May when the Middle East crisis occurred, and raw material prices are usually reflected in profits and losses a quarter later.”

He pointed out that the increasing sales proportion of pure electric vehicles (BEVs) is also a burden on profitability. Researcher Park said, “(BEVs) are estimated to be less profitable than hybrid vehicles (HEVs).”

At the same time, Kia's operating profit estimates for this year and next year were lowered to 11% and 27%, respectively.

However, Researcher Park expected that the proportion of HEVs would increase in the fourth quarter.

In addition, it is expected that the impact of the recent exchange rate decline will be offset by gains in valuation of sales guarantee provisions. He added, “Stable dividend payments are expected even in periods of increased performance volatility.”

Kia's current stock price is 117,600 won based on the previous day's closing price.