Korea Investment & Securities noted on the 19th that it is inevitable for Kumho Tire to face short-term performance deterioration due to the large fire that occurred over the weekend at its Gwangju plant. It also lowered the target stock price from the previous 7,000 won to 6,500 won while maintaining its investment opinion of 'buy'. The closing price of Kumho Tire on the previous trading day was 4,810 won.
A large fire broke out at the Kumho Tire Gwangju plant on the morning of the 17th, with more than 50% of the plant area burned down. As a result, long-term production disruptions seem unavoidable. Kumho Tire operates three plants in Korea, located in Gwangju, Gokseong, and Pyeongtaek, with an annual production capacity of 27 million units.
Researcher Kim Chang-ho from Korea Investment & Securities explained, 'The production capacity of the Gwangju plant is 16 million units, accounting for 60% of the domestic plant's production capacity. The planned production volume for this year was set at 12 million units, but if resuming operations within the year is difficult, a sales disruption of about 7 million units is expected.' This amount corresponds to 10.8% of the estimated sales volume for this year, which is 64.7 million units.
Following the fire, Korea Investment & Securities proposed two expected strategies for Kumho Tire. The first is the transfer strategy to the Hampyeong plant. Researcher Kim mentioned, 'Before the fire, there was already a plan to sell the aging Gwangju plant and promote the transfer to the new Hampyeong plant. As it has become realistically difficult to operate the Gwangju plant, it is highly likely that Kumho Tire will expedite the transfer to the Hampyeong plant.' The second strategy involves the reconstruction of the Gwangju plant, which could utilize the existing site if the reconstruction expense is relatively low for a quick recovery in production.
Researcher Kim stated, 'Reflecting the decrease in sales volume due to production disruptions, we have adjusted the performance estimate downward and lowered the target stock price. However, as we can utilize the Gokseong plant and the Vietnam plant, we believe that the long-term business sustainability can be maintained.'