KB Securities downgraded Kia's target stock price from 300,000 won to 250,000 won on July 27, citing recent weak performance. The brokerage maintained its 'buy' investment rating, noting that Kia's high profitability in internal combustion engines and hybrids, Hyundai Motor Group's future business vision, and investment capacity as Hyundai Mobis' largest shareholder remain intact. Kia's Q2 operating profit fell 4.9% year-on-year to 2.6 trillion won, missing consensus by 5.9%, as increased incentives to capture Europe's growing electric vehicle market weighed on short-term earnings.
Kia Q2 Operating Profit Falls 4.9% to 2.6 Trillion Won
Kia's Q2 operating profit declined 4.9% year-on-year to 2.6 trillion won, falling 5.9% short of market consensus. KB Securities analyzed that Kia faced 723 billion won in operating profit reduction factors in Q2 due to increased incentives, but the actual profit decline was limited to 136.2 billion won thanks to favorable exchange rates and increased hybrid sales. The brokerage assessed that the incentive increases were aimed at preempting Europe's rapidly growing electric vehicle market and would contribute positively to long-term operating profit despite being a short-term profit reduction factor.
KB Securities Forecasts 9.5 Trillion Won Annual Operating Profit
KB Securities projected Kia's annual operating profit for this year at 9.5 trillion won, up 5.1% from the previous year. This figure is 7.3% below market consensus and 1.5% above KB Securities' previous forecast. The brokerage explained that the revision reflects Kia's better-than-expected per-unit contribution profit and upward revisions to exchange rate forecasts.
KB Securities Cites Strategic Holdings and Valuation Appeal
KB Securities cited Kia's current business direction and stakes in key companies as reasons for maintaining its 'buy' investment rating. According to KB Securities, Kia is expanding its electric vehicle market share based on high profitability from internal combustion engines and hybrids, while generating investment resources needed for future industry transitions such as humanoids and autonomous driving. Kia holds an indirect 16.7% stake in Boston Dynamics, and KB Securities projected that the stake will increase further through SoftBank's put option exercise. Kang Seong-jin, KB Securities researcher, stated, "As market volatility expanded, Kia's stock price fell 27.3% from its yearly high, strengthening its valuation appeal. Kia is the largest shareholder of Hyundai Mobis (18.1% stake), and could attract attention in the long term during Hyundai Motor Group's governance structure changes."
FAQ
Why did KB Securities lower Kia's target stock price to 250,000 won?
KB Securities lowered Kia's target price from 300,000 won to 250,000 won on July 27 due to recent weak performance, as Kia's Q2 operating profit fell 4.9% year-on-year to 2.6 trillion won and missed consensus by 5.9%.
What is KB Securities' annual operating profit forecast for Kia?
KB Securities projected Kia's annual operating profit for this year at 9.5 trillion won, up 5.1% from the previous year, which is 7.3% below market consensus and 1.5% above KB Securities' previous forecast.
