1. Q2 Earnings: A Mixed Bag

Hankook & Company’s Q2 revenue reached ₩343.7 billion, missing estimates by 14%, while operating profit came in at ₩73.8 billion, a substantial 39% below projections. However, net profit defied expectations, reaching ₩56.5 billion.

2. Drivers of Underperformance: Exchange Rates and Economic Slowdown

The weaker revenue and operating profit are primarily attributed to the rising KRW/USD exchange rate, the global economic slowdown, and intensified competition in the battery market. The appreciating dollar likely increased foreign exchange-related costs, while the economic slowdown dampened demand for automobiles and batteries.

3. The Net Profit Surprise: Affiliate Investments and Cost Control

The surprising net profit beat is likely due to strong performance by key affiliates and Hankook & Company’s proactive cost-cutting measures. Gains from derivatives might have also contributed to the net profit increase.

4. Investment Implications: Navigating Uncertainty

In the short term, the weaker revenue and operating profit could put downward pressure on the stock price. However, the higher-than-expected net profit offers a positive sign. Investors should focus on the company’s ability to manage exchange rate volatility, the competitiveness of its businesses, and its growth potential. Critically, the sustainability of the factors driving the net profit beat needs careful consideration.

5. Action Plan for Investors

  • Detailed Earnings Analysis: Dive into the business report and other sources to understand the specific reasons for the performance variations.
  • Exchange Rate Risk Management: Examine the company’s strategy for managing currency risks and assess its effectiveness.
  • Competitiveness and Growth Analysis: Evaluate the competitiveness of the battery business and the company’s U.S. market expansion strategy, focusing on future growth potential.