[Click eStock] "Hankook Tire Offsets Middle East Risks with Volume Growth... Target Price Raised"

On July 21, Hanwha Investment & Securities raised its target price for Hankook Tire & Technology from 84,000 won to 90,000 won, stating that the negative impact from the Middle East crisis would be offset by increased volume and improved product mix. The firm maintained its "Buy" investment rating.

Sungrae Kim, a researcher at Hanwha Investment & Securities, commented, "While there are concerns about rising raw material prices in the tire segment in the second half of the year due to the Middle East crisis, these will be offset by increased volume and an improved product mix. With a stable turnaround in the thermal management business, we expect Hankook Tire & Technology's consolidated net profit this year to improve by 27% year-on-year, and by 18.6% in 2027." He also explained, "Furthermore, as the company implements a gradual increase in payout ratio to around 35% between 2025 and 2027, the expected dividend per share (DPS) for 2027 is projected to reach 4,800 won, more than double the 2025 level."

Hankook Tire & Technology's results for the second quarter of this year are expected to be solid. In the tire segment, second-quarter sales are anticipated to reach 2.7 trillion won, up 7.3% year-on-year, in line with market expectations. Kim noted, "Favorable foreign exchange effects and higher regional selling prices will contribute to revenue growth. The full-quarter impact from price hikes in Europe and Korea during the first quarter will be reflected in the second quarter, and increased sales of Europe all-weather and electric vehicle (EV) tires, along with higher volume of premium new vehicle original equipment (OE) and replacement (RE) tires in China, are expected to boost sales growth in the tire segment."

In the tire segment, operating profit for the second quarter is projected to rise by 19.4% to 413.5 billion won, maintaining robust profitability. Kim explained, "Although oil price increases since March and the upward trend in the Shanghai Containerized Freight Index (SCFI) starting in May have begun to affect costs, stabilized pricing is still being applied up to the second quarter, and a high base effect from tariffs last year will lead to a 1.5 percentage point decline in the cost-to-sales ratio to 65%, maintaining stable cost levels."

However, the recent increase in natural and synthetic rubber prices triggered by the Middle East situation in March is now being reflected in input costs, making cost increases unavoidable in the third quarter. Kim remarked, "Uncertainties still remain, but with oil prices having somewhat declined since June, concerns about further increases in key raw material prices such as natural and synthetic rubber are unlikely to worsen beyond the third quarter." He added, "Meanwhile, growth drivers such as increased product demand in the second half of the year for winter tires, improved product mix centered on all-weather and EV tires in Europe, and selling price increases in regions such as North America can offset concerns over higher costs in the latter half of the year."

This content was produced with the assistance of AI translation services.