Hanwha Investment & Securities announced on July 27 that while Kia's global sales competitiveness remains strong, the impact of new car launches has fallen short of expectations, prompting a reduction in the target price from 290,000 won to 280,000 won. The investment rating remains 'buy.'
Kim Seong-rae, a researcher at Hanwha Investment & Securities, stated, "In the second quarter, sales reached 33.2 trillion won, aligning with market expectations, but operating profit was 2.629 trillion won, falling below consensus. Despite the expansion of eco-friendly vehicle sales and an increase in average selling prices (ASP), heightened competition in North America and Europe led to increased incentives and a disappointing mix effect from new car launches, limiting profitability improvements."
Kia reported a global wholesale sales volume of 852,000 units in the second quarter, a 4.5% increase compared to the same period last year. Sales of eco-friendly vehicles surged to 296,000 units, marking a 60% increase and achieving the highest quarterly revenue. Notably, global electric vehicle sales reached 110,000 units, an 88.4% increase year-on-year, driven by the launch of the EV2.
However, the increase in incentives due to intensified competition in North America and Europe amounted to 723 billion won, and despite the launch of key new models like the Telluride and EV2, a negative mix effect of 178 billion won was observed, resulting in operating profit that fell short of market expectations.
Kim forecasts that sales growth and revenue increases will continue in the second half of the year, supported by an expanded new car cycle. He anticipates wholesale sales to reach 3.26 million units this year, projecting annual revenue to exceed the company's guidance at 126.9 trillion won, factoring in ASP increases and exchange rate effects. However, he noted that the mix effect from demand slowdown in North America and Europe, along with increased incentives for budget electric vehicles, may be weaker than initially expected.
He added, "To achieve the annual operating profit guidance, improving the mix through increased sales of North American SUVs such as the Telluride, Sportage, and Seltos, as well as hybrids (HEVs), will be crucial in the second half. Additionally, the impact of tariffs is expected to be less significant than last year, contributing to profitability improvements."
Furthermore, he mentioned, "With SoftBank's exercise of its put option, the indirect stake through HMG Global in BYD is expected to rise from 17.2% to 19.1%. The progress in the commercialization development of Atlas using RMAC in August is also expected to alleviate concerns regarding the mobility business value."
* This article has been translated by AI.
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