On the 27th, DS Investment & Securities said profitability at Hankook Tire & Technology is expected to improve on simultaneous growth in operating profit and sales. It also viewed positively the company's moves to enhance shareholder value.
It set a target price of 71,000 won and a "Buy" investment rating. The previous trading day's closing price of Hankook Tire & Technology was 59,300 won.
DS Investment & Securities projected that results will improve thanks to higher output at Hankook Tire's second Tennessee plant in the United States and a recovery in European demand, forecasting this year's sales at 22.4 trillion won and an operating margin of 9.7%. Those figures are up 5.4% and 1 percentage point, respectively, from a year earlier.
Researcher Chey Tae-won at DS Investment & Securities said, "When sales and operating profit grow together, the average price-earnings ratio during such periods is 6.6 times," and "even with a discount applied for 'Oner' risk, it is 5.6 times."
Rising demand for electric vehicles in Europe translates into increased demand for the high-inch tires used on electric vehicles. In the short term, high-inch tires as well as regular tires are expected to benefit.
Centered on key sales regions, price hikes, a higher share of high-inch tires, and favorable exchange rates are expected to lift the average selling price by 2.2% from a year earlier.
Chey said, "With tariff cuts, tariff expenses are expected to shrink from 27 billion won to 15 billion won," adding, "Additional relief is possible with increased output at local plants."
In addition, Hankook Tire will gradually raise its payout ratio from the current 20% to 35% by 2027 according to results and implement interim dividends.
Chey explained, "As the company's value is currently undervalued, the stock price will rise as both performance improvement and the appeal of shareholder returns increase at the same time."