‘In line’ results leave analysts expecting more from Hankook

Hankook’s second quarter results show that the manufacturer is well-placed to take advantage of the anticipated gradual recovery of replacement markets in the next year and a half. Indeed, the 1.4 per cent increase in revenue growth indicates that the Korean manufacturer is already experiencing some upward momentum, this figure having declined in the previous two quarters. Deutsche Bank analyst Sanjeev Rana commented that the company’s ongoing product mix improvement and falling raw materials costs should combine with the American and European recovery to keep Hankook’s margins “resilient”, while the bank also expects its operating profit to “grow 18 per cent” year-on-year in in the second half of 2013.

Deutsche Bank’s report suggested the up-turn in Hankook’s revenue growth means that average selling price pressure “is easing a bit”, meaning the bank expects “price cuts and overheated industry competition to moderate” in the second half of the year. Having said this, average selling price was down two per cent YoY and three per cent quarter on quarter. 

Deutsche Bank explained the major reasons for operating profit margin increase were a 12 per cent decline in raw material cost and 4.5 per cent increase in sales volume. Rana also noted the strength of Hankook’s planned global capacity expansion to 110 million units by 2016 (from 89 million units in 2012).