[Edaily Reporter PARK MIN ] On the 5th, Shinhan Investment Securities analyzed that NEXENTIRE(002350)saw a sharp decline in third-quarter profitability due to the use of raw materials purchased during the period of high exchange rates in the first half of the year and large-scale foreign exchange-related losses, and predicted that a full-scale normalization of profitability will become visible starting in 2028.

While maintaining a “Buy” rating, the firm lowered its target price by 7.1% from 8,500 won to 7,900 won to reflect downward revisions to earnings estimates and valuation adjustments among global peers. Based on the previous trading day’s closing price (5,850 won), the stock has upside potential of 35.0%.

Park Kwang-rae, a research analyst at Shinhan Investment Securities, stated in a report published today, “NEXENTIRE’s third-quarter consolidated revenue rose 4.4% year-over-year to 814.8 billion won, while operating profit fell 61.1% to 18.1 billion won (operating margin of 2.2%), falling short of the market consensus (operating profit of 33.4 billion won).”

By region, performance in Europe and North America was mixed. Sales in Europe rose 8.8% year-over-year, driven by expanded supply of original equipment (OE) tires to major automakers, price hikes implemented last June, and strong sales of winter and all-season tires. In contrast, sales in North America fell 5.1% due to slowing demand for replacement (RE) tires and the restructuring of local distribution channels.

Research Fellow Park identified “cost lag” as the key cause of the sharp decline in profitability. He explained, “Raw materials purchased during the first half of the year when the won-dollar exchange rate was high were concentrated in the cost of sales for the third quarter with a lag of three to four months.” In fact, the company recorded a net loss attributable to controlling shareholders of 46.6 billion won—marking a shift to a deficit—due to foreign currency translation losses of 82.2 billion won and foreign exchange losses of 9.8 billion won.

Shinhan Investment Securities estimated fourth-quarter operating profit at 20.1 billion won, a 50.2% decrease from the same period last year. Research Analyst Park noted, “While there are positive factors—such as the exchange rate decline in the third quarter gradually being reflected in raw material purchase prices, price hikes in Europe, a 3% increase in domestic replacement tire prices, and the expansion of new distribution channels in North America—the scope for short-term cost improvements will be limited due to rising natural rubber prices, high ocean freight rates, and the burden of U.S. anti-dumping duties.”

Shinhan Investment Securities defined 2027 as a “transition period” for NEXENTIRE’s structural improvement and projected a clear rebound beginning in 2028. NEXENTIRE’s annual operating profit is estimated to recover sequentially from 126.7 billion won in 2026 to 155.3 billion won in 2027 (+22.4% year-over-year) and 213.7 billion won in 2028 (+37.6% year-over-year).

Research Analyst Park noted, “With the price-to-book ratio (PBR) currently at 0.3x, there is clearly appeal in the stock’s undervaluation,” but added, “However, for the stock price to enter a full-fledged re-rating phase, a turnaround in North American sales volume, along with a decline in actual raw material costs and transportation expenses, must be reflected in the company’s earnings.”

Regarding the target price calculation, he added, “We derived the figure by applying an average target price-to-earnings ratio (Target PER; the target price-to-earnings multiple relative to profitability) of 9.3x—based on the 12-month forward earnings per share (EPS; net income divided by the total number of shares outstanding)—of 847.1 won to global tire companies with similar market capitalizations.”