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[Alpha Biz= Kim Sangjin] Kiwoom Securities has lowered its target price for Nexen Tire by 37%, anticipating that the company will report disappointing fourth-quarter results below market expectations.
Due to the weak performance, Kiwoom predicts that the stock will remain within a range-bound market for the time being and has downgraded its investment rating from "Buy" to "Market Perform," indicating an expected stock fluctuation of around 10%.
In a report released today, Kiwoom estimates that Nexen Tire’s operating profit for the fourth quarter of last year will be 20 billion KRW, down 68.8% compared to 64.1 billion KRW during the same period the previous year.
This figure is far below the market consensus, which is an average estimate of 52.7 billion KRW from domestic securities firms, according to financial information provider FnGuide.
Kiwoom attributes the weak performance to the implementation of the European Union's Forest Risk Mitigation Regulation (EUDR) and bankruptcies of key North American clients. Analyst Shin stated, “The increase in manufacturing costs due to the use of natural rubber under EUDR and the decline in North American sales following the bankruptcy of key replacement tire clients have contributed to the performance decline.”
Additionally, financial pressures are mounting as production input from pre-stocked natural rubber has been delayed due to the one-year postponement of EUDR implementation.
As a result, Kiwoom Securities has revised its target price for Nexen Tire from 9,700 KRW to 6,100 KRW and lowered its investment opinion, noting that a rebound in the stock price is unlikely in the near term. As of the previous day, Nexen Tire’s stock price was 5,760 KRW, according to the Korea Exchange.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
