[Edaily Reporter Park Soon-yeop] Analysts suggest that KT&G has entered a phase of revaluation, driven by growth in its overseas tobacco business and expanded shareholder returns. Despite stagnation in the domestic tobacco market, sales of cigarettes overseas and next-generation tobacco (NGP) products are both increasing simultaneously. Combined with expectations of share buybacks and increased dividends, interest from foreign investors is also growing.
On the 19th, DS Investment & Securities maintained its “Buy” rating on #KT&G and raised its target price by 14.3% from 210,000 won to 240,000 won. Based on the closing price of 180,400 won on the 18th, this represents an upside potential of 33.0%.
Jang Ji-hye, an analyst at DS Investment & Securities, explained, “KT&G’s recent earnings growth has been driven by its overseas cigarette business,” adding, “Considering the growth of its overseas cigarette business and NGP, as well as expanded shareholder returns, the valuation discount relative to global competitors needs to be narrowed.”

KT&G’s overseas cigarette sales increased at an average annual rate of 26%, rising from 602.8 billion won in 2020 to 1.88 trillion won in 2025. During the same period, the share of overseas sales in total cigarette revenue jumped from 26% to 54%. This was the result of simultaneous increases in sales volume and average selling price (ASP).
DS Investment & Securities forecasts that KT&G’s overseas cigarette sales will rise to 2.3 trillion won this year and 2.8 trillion won next year. The firm believes that entering new markets and expanding market penetration through direct expansion and a diverse brand lineup, coupled with improved profitability as the share of local production increases due to expanded overseas production capacity, will drive this growth.
The expansion of overseas production was also cited as a key investment point. KT&G is expanding its overseas production bases in countries such as Türkiye, Russia, Indonesia, and Kazakhstan. Through these efforts, the company plans to increase the proportion of global production from around 30% in 2025 to over 50%. As local production increases, logistics costs and the cost of procuring raw materials are expected to decrease, leading to a reduction in manufacturing costs per unit.
The next-generation tobacco (NGP) segment was also identified as a key growth driver. KT&G’s combined domestic and international NGP sales grew at an average annual rate of 26%, rising from 2793억원 in 2020 to 8901억원 in 2025. The share of NGP sales in the overall tobacco business also increased from 9% to 20% during the same period.
KT&G has been growing its NGP business centered on the “LIL” heated tobacco product platform. Sales of heated tobacco sticks, which stood at 3.1 billion in 2020, rose to 14.8 billion in 2025. In addition, the company expanded its NGP product lineup through the acquisition of Another Snus Factory (ASF), a Nordic nicotine pouch manufacturer. DS Investment & Securities believes that nicotine pouches could serve as a long-term growth driver for KT&G in the future.
Expanded shareholder returns are another factor contributing to the stock’s revaluation. KT&G has announced a shareholder return policy totaling 3.7 trillion won over the four-year period from 2024 to 2027. This includes 2.4 trillion won in dividends and 1.3 trillion won in share buybacks. This year, the company achieved its share cancellation target ahead of schedule by canceling all 10.86 million shares of treasury stock it held, valued at 1.9 trillion won.
The company is also scheduled to announce a new dividend policy in the second half of the year. While KT&G’s current dividend payout ratio target is 50% or higher, DS Investment & Securities analyzed that there is potential for an upward revision to the dividend policy, considering that the average dividend payout ratio among global tobacco companies is around 70%.
These changes are also reflected in foreign investor activity. BlackRock acquired a 5.01% stake in KT&G in January of this year and increased its holding to 6.15% in May. Capital Group also disclosed a 5.61% stake in May and raised its stake to 7.21% by the end of the same month. First Eagle Global Fund and the Government of Singapore Investment Corporation (GIC) also hold more than 5% of KT&G’s shares. As of the 18th, the proportion of KT&G’s market capitalization held by foreign investors had expanded to 51.2%.
DS Investment & Securities forecasts KT&G’s consolidated revenue for this year to reach 6.9 trillion won, a 6% increase year-over-year, and operating profit to rise 11% to 1.49 trillion won. The firm expects the tobacco division’s revenue of 4.8 trillion won and operating profit of 1.3 trillion won to drive overall earnings growth.
Analyst Jang stated, “KT&G is delivering shareholder returns that exceed those of its global peers, amid expectations for stable earnings growth from overseas conventional cigarettes and long-term growth driven by NGP,” adding, “We have reduced the discount rate applied to our target price calculation relative to global competitor Philip Morris International (PMI) from 30% to 10%.”