IBK Securities said on the 19th that as KT&G's overseas plants begin operating this year, the trend of improving profitability will continue. It maintained a "Buy" investment rating and a target price of 170,000 won. KT&G's previous trading day closing price was 142,300 won.
IBK Securities forecast KT&G's fourth-quarter last year consolidation sales and operating profit at 1.7179 trillion won and 243.9 billion won, respectively. Those represent increases of 10.4% and 14.8% from a year earlier.
Kim Tae-hyun, an analyst at IBK Securities, said, "Cigarette sales appear likely to slow somewhat due to inventory adjustments in the market, but results are expected to largely meet the consensus thanks to earnings growth in the real estate sector."
As for why the tobacco business sector is expected to be sluggish, Kim explained that pull-forward demand during the Chuseok holiday in the third quarter last year makes a fourth-quarter gap in domestic combustible cigarette and heated tobacco sales unavoidable. In overseas sectors as well, sales growth is expected to be limited due to year-end inventory management by clients.
IBK Securities projected tobacco sector sales at 1.0575 trillion won, up 4.5% from a year earlier. However, it expected operating profit at 209.4 billion won, down 6.3% year over year. Health supplement sales and operating profit were forecast at 272.3 billion won, down 15.5% year over year, and 6 billion won, up 7%, respectively.
The real estate sector was analyzed to play the role of a cash cow. Real estate sales and operating profit were forecast at 299.6 billion won and 27.3 billion won, respectively. Sales are expected to jump 118.5% from a year earlier and operating profit to swing to a surplus.
Kim said, "Earnings recognition is seen reflecting progress in the percentage-of-completion for small and mid-sized development projects such as Anyang, Mia, and Dong Daejeon, and about 150 billion won in one-off revenue from the completion of the Seocho SPC project," adding, "In addition, infrastructure construction costs for the Suwon project, which were about 51 billion won in the fourth quarter of 2024, have decreased significantly to about 10 billion won."
This year's consolidation sales and operating profit were projected at 7.015 trillion won and 1.4581 trillion won. Those figures represent increases of 6.5% and 8.4% from a year earlier.
Kim said, "With the Kazakhstan plant operating rate exceeding 70%, the Indonesia plant is also expected to begin mass production in February," adding, "There is significant room for profitability improvement from expanded local production, and as the nicotine pouch business ramps up in earnest starting this year, overseas growth momentum is expected to strengthen further."