Kumho Tire is forecast to record revenue growth in Q2 this year despite a decline in operating profit, driven by the restart of its Gwangju plant following a fire. According to a compilation by Yonhap Infomax of forecasts from eight securities firms submitted within the past three months, the company's Q2 operating profit is expected to reach 140.9 billion won, down 19.56% year-on-year, while revenue is projected to increase 4.99% to 1.2822 trillion won. The profit decline reflects a base effect from a one-time tariff refund of over 40 billion won recorded in Q2 last year. The Gwangju plant's proximity to the Honam semiconductor cluster site has led to Kumho Tire being classified as a 'Honam semiconductor beneficiary stock,' with the stock price surging from the early 4,000 won range to the late 7,000 won range over the past month.
Kumho Tire Q2 Forecast Shows Revenue Growth Despite Profit Decline
Eight securities firms project Kumho Tire's Q2 operating profit at 140.9 billion won, a 19.56% decrease from the same period last year. Revenue is forecast to grow 4.99% to 1.2822 trillion won. The operating profit decline is attributed to a base effect: Q2 last year included a one-time U.S. tariff refund exceeding 40 billion won.
Gwangju Plant Restart Drives Sales Volume Recovery
The Gwangju plant, which had been halted due to fire, has resumed operations. Park Kwang-rae, a researcher at Shinhan Investment & Securities, stated that "the Gwangju Plant 1 will restart with an annual capacity of 3 million units, and sales volume will recover quarter-on-quarter with the addition of volume transfers from Gokseong and Vietnam, plus expanded outsourcing through parent company Doublestar." Average selling prices (ASP) continue to rise due to price increases and expanded volumes in North America and Europe.
EU Anti-Dumping Tariff Poses Challenge from Q3
Starting in Q3 this year, the European Union's anti-dumping tariff on Chinese-made tires is expected to negatively impact Kumho Tire. The EU applies a 24.4% anti-dumping tariff to Kumho Tire's Chinese-made tires. Kumho Tire does not have a production facility in Europe, and Chinese-made products account for approximately half of its Europe-bound volume.
Analysts Debate Valuation Impact of Semiconductor Cluster Proximity
The Gwangju plant is located near the site designated for the Honam semiconductor cluster, leading to Kumho Tire's recent classification as a 'Honam semiconductor theme stock.' Over the past month, the stock price surged from the early 4,000 won range to a short-term peak in the late 7,000 won range before fluctuating around 6,000 won.
Some securities firms have changed their valuation methodology for Kumho Tire from price-to-earnings ratio (PER) to price-to-book ratio (PBR) to reflect potential changes in book value from a possible sale of the Gwangju plant site. Kim Gwi-yeon, a researcher at Daishin Securities, switched the valuation method from PER to PBR and raised the target price 28% to 8,300 won. Kim stated, "If the sale of the Gwangju plant site becomes a reality, investment capacity for new plants in Gwangju and Poland will expand, and it will be possible to reduce interest expenses through debt repayment and increase earnings per share (EPS). Volatility due to news will be inevitable, but as business progress becomes visible, the visibility of benefits will also rise."
Yoo Ji-woong, a researcher at Daol Investment & Securities, noted that "the value of the Gwangju plant site alone explains most of the current market capitalization."
Other analysts view the semiconductor theme as a short-term trading factor. Park Kwang-rae advised, "The recent trend of being classified as a 'Honam semiconductor theme stock' should be interpreted as a reflection of short-term supply and demand factors. In actual investment decisions, focus should be placed on the completion of the Hampyeong and Poland plants."
FAQ
What is Kumho Tire's Q2 forecast for this year?
Kumho Tire is forecast to post Q2 operating profit of 140.9 billion won (down 19.56% year-on-year) and revenue of 1.2822 trillion won (up 4.99% year-on-year), according to a compilation of forecasts from eight securities firms by Yonhap Infomax.
Why is Kumho Tire's Q2 operating profit expected to decline despite revenue growth?
The operating profit decline reflects a base effect from Q2 last year, when a one-time U.S. tariff refund exceeding 40 billion won was recorded. Revenue growth is driven by the restart of the Gwangju plant after a fire and expanded outsourcing through parent company Doublestar.
How does the Honam semiconductor cluster affect Kumho Tire's valuation?
Kumho Tire's Gwangju plant is located near the site designated for the Honam semiconductor cluster. This proximity has led analysts to reclassify the stock as a 'Honam semiconductor beneficiary,' with some firms switching valuation methodology from PER to PBR. Daishin Securities raised its target price to 8,300 won, citing potential asset value gains if the plant site is sold.
