'Up 70% from here': Analysts raise targets on Hankook Tire as EV tire play gains traction

Securities firms are raising their price targets on Hankook Tire & Technology as the company's early push into the battery electric vehicle tire market begins to pay off. Analysts say earnings improvement expectations are growing as growth spreads from original equipment supply into the replacement tire segment.

Meritz Securities on Tuesday set a new price target of 120,000 won ($81) for Hankook Tire & Technology, up from its previous target. The figure is more than 70 percent above Monday's closing price of 70,100 won and is the highest target currently on the Street.

Analysts say the competitive position Hankook Tire has built in the EV-dedicated tire market is the central driver of a broader revaluation of the company.

According to Meritz Securities, BEVs are expected to account for 33 percent of Hankook Tire's original equipment sales this year, up from 5 percent in 2021. Over the same period, the EV share of global passenger car sales is projected to rise from 6 percent to around 20 percent.

EV original equipment tires are also more profitable than those for internal combustion engine vehicles. The operating profit margin on BEV OE tires is estimated at 7 to 9 percent — roughly double the 3 to 5 percent margin on ICE tires.

Hankook Tire is expanding supply agreements with global automakers under its EV-dedicated brand iON.

"Hankook Tire is supplying OE tires to US and Chinese manufacturers including Tesla, BYD, Xiaomi, Huawei and IM Motors," said Kim Jun-seong, an analyst at Meritz Securities. "The first-mover advantage in the BEV tire market is also translating into supply contracts for new BEV models from legacy automakers such as Volkswagen and BMW."

The replacement tire market also offers significant upside. About four to five years have passed since EV adoption accelerated in 2021, meaning the first major wave of replacement demand is now arriving.

Replacement EV tires carry higher margins than OE tires. The industry estimates an average replacement cycle of 4.6 years, and analysts expect the segment to grow rapidly starting this year.

"BEVs still account for no more than 8 to 9 percent of Hankook Tire's replacement tire sales," Kim said, "but this year marks the start of a full-scale replacement cycle."

The earnings outlook is also encouraging. Hanwha Investment Securities estimates Hankook Tire's tire division will post sales of 2.7 trillion won and operating profit of 413.5 billion won in the second quarter of this year, up 7.3 percent and 19.4 percent, respectively, from the same period last year.

However, rising raw material costs — particularly natural and synthetic rubber — are seen as a risk to second-half earnings. Analysts note that prolonged geopolitical tensions in the Middle East could add further cost pressure.

"Hankook Tire's sales growth momentum is being sustained by stronger demand for winter tires in the second half, an improved product mix in Europe and price increases in North America and other regions," said Kim Seong-rae, an analyst at Hanwha Investment Securities. He added that the ramp-up of the company's Tennessee factory and the EU's anti-dumping tariffs on Chinese tires should help Hankook Tire gain a pricing advantage over rivals.

Analysts believe Hankook Tire's growth story extends well beyond a simple rise in EV sales. As EV adoption drives higher OE supply and the replacement market opens in earnest, the share of high-margin business is expected to grow steadily — raising expectations that both earnings and the company's overall valuation will be reassessed in the period ahead.