[THE INVESTOR] Kumho Tire is likely to continue facing difficulties next year, said Hanwha Investment and Securities on Dec. 1, but maintained a “buy” recommendation and 8,000 won (US$7.35) target price.
Demand in Europe and China is rising and emerging markets are recovering fast but the tire maker’s profitability has been significantly hurt by the steep competition in the US and China, said analyst Ryu Yeon-hwa.
The operation rate of its plants will maintain an upturn until next year, though, as Hyundai and Kia Motors’ shipment of original equipment is recovering, according to the analyst.
The official announcement of Kumho Asiana group Chairman Park Sam-koo that he has no intention to regain Kumho Tire has alleviated uncertainties for M&A as well, she noted.
Its operating profit will turn to black in the fourth quarter, forecast Ryu estimating that it will reach 53 billion won next year while burdened by interests from excessive borrowing, net loss will come in at 43 billion won.
Kumho Tire will need more time to normalize following the M&A cancellation and even more time to regain market confidence, added the analyst.
By Hwang You-mee (firstname.lastname@example.org)