Hana Securities reported on May 11 that Hankook Tire & Technology (Hankook Tire) is expected to experience a temporary decline in profitability due to rising raw material and shipping costs driven by increasing oil prices. However, the firm stated that the impact will not be significant and maintained its target price at 80,000 won with an investment recommendation of 'buy.'
Song Seon-jae, a researcher at Hana Securities, noted, "Historically, we have seen a cycle of 'cost increase - profitability decline - price increase - profitability recovery,' and this time will be no different. We expect Hankook Tire to maintain high profitability in its tire segment through excellent cost control, price increases, and improved product mix."
He also highlighted that the performance of its subsidiary, Hanon Systems, which had previously burdened the company's financials, is improving, and shareholder returns are expected to increase.
Song projected that the rise in raw material costs due to the recent conflict in the Middle East will be reflected in contracts starting in the second quarter, with actual costs being incurred three months later and profit and loss impacts expected to be seen four to six months afterward. He added, "While the related impacts will be reflected in the second half of the year, they are not expected to be very significant."
He further explained that diversifying the sources of raw materials will help mitigate the impact of rising costs, and price increases are being prepared regionally. Although there are factors that could increase shipping costs due to rising oil prices, he anticipates that overall shipping demand will decline, leading to contracts in the second half of the year being similar to or more favorable than those in the first half.
Additionally, he stated, "Production increases at the Tennessee plant in the U.S. are proceeding as planned, and we expect profitability to rise to average tire margins once full capacity production is achieved in the second half of the year."
* This article has been translated by AI.
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