April 27, 2024

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[THE INVESTOR] KT&G’s first-quarter earnings will be weighed down by declining domestic sales and struggling exports, said Mirae Asset Daewoo on March 28, lowering the target price to 135,000 won (US$125.76) from 145,000 won.

Revenue in the period will decline 5.2 percent on-year and operating profit by 16.4 percent. Its operating profit for the whole year will be down 5.3 percent from a year ago, estimated analyst Baek Un-mok.

E-cigarettes will incur a loss in the first half but profitability will improve as sales of the product expands nationwide, and may reach break-even point in the latter half when the more than 200 million sticks are sold per month, said the analyst.

The tobacco company plans to launch another electronic device and expand lineup of Fiit, a cigarette designed for heat-not-burn devices. The growth of e-cigarette market could be an opportunity for its long-term growth, stressed Baek.

Considering the rising sales of e-cigarettes, expanding market for tobacco export, developing site in Suwon, high dividends and valuation in comparison with its global peers, KT&G’s current stock price is suitable for purchase, he added.

By Hwang You-mee (glamazon@heraldcorp.com)