On Friday, Nomura/Instinet adjusted its financial outlook for KT&G Corporation (033780:KS) (OTC: KTCIF), a South Korean tobacco company. The firm increased the shares target to KRW117,000 from KRW100,000, while keeping a Neutral rating on the stock.
The adjustment comes amid KT&G's continued growth in the e-cigarette market across 33 countries, coupled with its core tobacco business showing signs of growth. Despite challenges in the red ginseng and construction sectors, the tobacco and red ginseng operations are projected to achieve a 6% operating profit growth, aligning with the company's full-year 2024 guidance.
KT&G has demonstrated solid export growth and an improved product mix, leading to higher average selling prices in exports. The company has also enacted price increases in key overseas markets. In an effort to enhance profitability, KT&G's management has effectively controlled costs, including cost of goods sold (COGS) and selling, general, and administrative expenses (SG&A), particularly within its red ginseng business.
Additionally, KT&G has announced an upgraded shareholder returns policy, which is supported by asset monetization. The plan includes a total return of KRW3.7 trillion during the fiscal years 2024 to 2027, comprising cash dividends of KRW2.4 trillion and share buybacks or cancellations amounting to KRW1.3 trillion. This policy reflects the company's commitment to enhancing value for its shareholders.
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