Hana Securities on the 10th raised its target price for Hankook Tire & Technology, saying third-quarter results far exceeded expectations. It maintained a Buy rating and set a target price of 60,000 won, up 25% from the previous target. Hankook Tire & Technology's previous session closing price was 49,350 won.
Hankook Tire & Technology's third-quarter results beat market expectations. Consolidation basis sales in the third quarter of this year came to 5.41 trillion won, up 122% from a year earlier. Operating profit was 586 billion won, up 25% from a year earlier. In particular, third-quarter operating profit delivered strong results, exceeding the consensus (market forecast) of 334 billion won by 43%.
Song Seon-jae, an analyst at Hana Securities, said, "Starting in the first quarter of this year, Hanon Systems in the thermal management institutional sector was newly included in consolidation, resulting in a large rate of change."
In the tire institutional sector, sales and operating profit rose 11% and 10% on-year to 2.71 trillion won and 519.2 billion won, respectively. Song said, "Sales growth was positively driven by volume, pricing, and exchange rates," adding, "Third-quarter sales in North America fell, but sales grew 20% in Korea, 18% in Europe, and 3% in China."
Song analyzed, "The strong fundamentals of the core tire business partially offset negative perceptions of the Hanon Systems acquisition and participation in additional capital increases."
Also, price increases to reflect recent tariff pass-through, along with a growing share of high-priced tire sales mainly in Europe, are creating a mix effect. Meanwhile, key materials and supplies input costs and logistics costs are declining, improving cost profitability relative to selling prices.
Hankook Tire & Technology said on a recent conference call that U.S. tariff expense accounted for 1% of tire sales, that it raised selling prices through July in response to the tariff, and that it could consider additional price increases depending on market conditions.
Song analyzed, "Competitive intensity in the United States had been increasing, but eased in the third quarter as imports of low-priced tires decreased."
The Tennessee plant expansion is proceeding as planned, and sales activities will be strengthened in line with the completion schedule. The European market is also expected to be positive for sales growth, as the policy mandating winter tire installation continues.