KT&G is projected to report a 14.18% year-over-year increase in Q2 operating profit to 399.5 billion won, according to a consensus forecast from 11 major domestic securities firms surveyed by Yonhap Infomax on the 29th. The South Korean tobacco company's revenue is expected to reach 1.676 trillion won, up 8.28% from the same period last year, driven by strong overseas cigarette sales in Russia and Kazakhstan and resilient domestic tobacco demand. The forecast reflects improved product portfolio mix in overseas markets and higher-than-expected domestic tobacco consumption, which rose approximately 1% year-over-year compared to the typical 2% decline trend.
KT&G Domestic Tobacco Market Shows Resilient Demand Growth
Domestic tobacco total demand in Q2 increased approximately 1% year-over-year, exceeding expectations given the typical 2% decline trend in recent periods. KT&G's domestic cigarette market share rose by around 40 basis points compared to the same period last year, supported by strong sales of new products, resulting in slight revenue growth. Domestic NGP (Next Generation Product) sales volume increased by double digits year-over-year, with market share continuing its upward trajectory. The company's Q1 business segments by revenue were tobacco (67.8%), health functional food (19.5%), real estate (6.9%), and others (5.8%).
KT&G Overseas Cigarette Revenue Increases 16% in Russia and Kazakhstan
Overseas cigarette revenue is estimated to have increased 16% year-over-year in Q2, driven by price increases and expanded sales of premium products in Russia and Kazakhstan. While volume growth moderated compared to Q1's high growth rate and pre-order effects, profit growth is expected to outpace revenue growth. Securities firms assessed that overseas cigarette operations continue to drive profit growth through improved product portfolio composition beyond simple volume expansion. Overseas NGP revenue is projected to have increased approximately 30% due to base effects from device supply disruptions in the prior year.
KT&G Health Functional Food Operating Profit Surges 53.2%
Health functional food segment revenue and operating profit are expected to have increased 2.5% and 53.2% respectively in Q2. The performance improvement was attributed to promotional events during Korea's Family Month in May.
Analyst Highlights KT&G Portfolio Improvement and NGP Expansion
Han Yu-jeong, researcher at Hanwha Investment & Securities, stated that overseas cigarette volume growth, price increases, and domestic NGP market share expansion drove the company's earnings growth. Han noted that domestic NGP continues to offset declining domestic cigarette volume as market penetration maintains an upward trend. The analyst highlighted that the increasing proportion of premium NGP devices is positively driving product portfolio composition improvement. KT&G shares closed at 181,700 won on the 27th, down 0.49% from the previous session.
FAQ
What was KT&G's Q2 operating profit forecast?
KT&G's Q2 operating profit is projected at 399.5 billion won, representing a 14.18% year-over-year increase, according to a consensus from 11 securities firms surveyed by Yonhap Infomax on the 29th.
Why did KT&G's overseas cigarette revenue increase in Q2?
Overseas cigarette revenue increased approximately 16% year-over-year due to price increases and expanded sales of premium products in Russia and Kazakhstan, with profit growth driven by improved product portfolio composition.
