Kia Corporation price target cut from 190,000 won to 150,000 won... “Cautious approach to profitability recovery”

[Financial News] NH Investment & Securities cut its target price for Kia Corporation by 21.1%, from 190,000 won to 150,000 won.
The decision reflects its view that profitability improvements are being constrained despite growth in automobile sales, due to rising raw material prices, conflict in the Middle East, and the burden of incentives and price cuts as electric vehicle (EV) sales expand. It maintained its Buy recommendation but lowered both its earnings estimates and valuation.
Haneul, an analyst at NH Investment & Securities, said on the 2nd, “With global EV price competition continuing, a cautious approach to profitability recovery is needed until reduced incentives and the results of cost-cutting efforts become visible.”
Kia Corporation’s consolidated third-quarter revenue rose 10.1% year over year to 31.597 trillion won, but operating profit came in at 1.8183 trillion won, below the market consensus of 2.357 trillion won.
The operating margin was just 5.8%. The burden from rising raw material prices was estimated at 368 billion won, while the impact of the prolonged conflict in the Middle East was estimated at 209 billion won. Higher incentives and price-cut burdens associated with expanding EV sales also amounted to 727 billion won.
NH Investment & Securities cut its 2027 operating profit forecast by 17.3%, from 10.807 trillion won to 8.938 trillion won. It also lowered its forecast for this year by 12.2%, from 9.483 trillion won to 8.33 trillion won. The target price-to-earnings ratio (PER) used to calculate the target price was also reduced, from 8.4 times to 8.1 times.
Weaker expectations for new businesses were also reflected in the lower target price. Analyst Ha said this “reflects a reduced valuation premium due to the prolonged absence of momentum from new businesses.”
The analysis said expectations for Kia Corporation’s level of participation and role in new businesses had declined relative to those for Hyundai Motor Company, which is leading Hyundai Motor Group’s strategy for new businesses such as robotics.
Kia Corporation’s electrification strategy, however, remains in place. It plans to expand sales of hybrid electric vehicles (HEVs) in the United States and focus on EVs in Europe, while cutting the cost of key components by about 10% annually for three years to improve EV profitability.
Analyst Ha said the goal was to “normalize EV profitability by securing cost competitiveness within the next two to three years.”
NH Investment & Securities left open the possibility of a recovery in profitability next year, supported by increased hybrid sales in the United States and easing external pressures. However, it maintained a cautious view until cost cuts and reduced incentives are reflected in actual results.

[email protected] Kang Jung-mo Reporter