DS Securities raises KT&G target price to 240,000 won

DS Investment Securities raised its target price for KT&G (KOSPI: 033780) by 14% on the 19th, lifting it from 210,000 won to 240,000 won whilst maintaining a "buy" recommendation. Based on the most recent closing price of 180,400 won (as of the 18th), the implied upside is 33%.

The higher target reflects an increase in the firm's target price-to-earnings multiple from 15 times to 19 times. DS Securities has trimmed the discount it applies to KT&G relative to global rival Philip Morris International (PMI), which currently trades at roughly 21 times earnings, from 30% to just 10%—a sign of growing confidence that the Korean company deserves a valuation closer to its multinational peers.

Two engines of growth

DS Securities identifies two drivers behind KT&G's earnings expansion: overseas conventional cigarettes and next-generation products (NGP), a category that includes heated-tobacco devices and nicotine pouches.

International cigarette revenue has risen from 602.8 billion won in 2020 to 1.88 trillion won in 2025, a compound annual growth rate of 26%. Over the same period, the overseas share of total cigarette revenue has widened from 26% to 54%, meaning KT&G now earns more than half its cigarette income outside South Korea. DS Securities forecasts that figure will climb further, to 2.3 trillion won in 2026 and 2.8 trillion won in 2027, underpinned by entry into new markets with a diversified brand portfolio and cost reductions from expanding overseas production capacity.

A particular highlight is ESSE, KT&G's premium cigarette brand. In 2025 it recorded global sales of 1.1 trillion won, becoming the first single brand in the company's history to surpass one trillion won in overseas revenue.

NGP revenue has tracked a similarly steep trajectory, rising from 279.3 billion won in 2020 to 890.1 billion won in 2025—also a 26% CAGR. NGP's share of total tobacco-division revenue has doubled over that span, from 9% to 20%. KT&G broadened its NGP offering in 2025 by jointly acquiring ASF (Another Snus Factory), a Scandinavian nicotine-pouch manufacturer, together with Altria, the American tobacco giant.

Shareholder returns and rising foreign ownership

KT&G has committed to returning a total of 3.7 trillion won to shareholders over the four years from 2024 to 2027. Following the passage of an amended Commercial Act in South Korea in March this year, the company announced it would cancel all 10.86 million treasury shares it currently holds—equivalent to 9.5% of shares outstanding, or approximately 1.9 trillion won—rather than reissuing them. A new dividend policy is expected to be announced in the second half of the year.

The combination of robust earnings growth and generous capital returns is attracting global asset managers. BlackRock raised its stake from 5.01% in January to 6.15% by May; Capital Research similarly increased its holding from 5.61% to 7.21% over the same period. Foreign ownership in KT&G reached 51.2% as of 18th June.

Forecasts

DS Securities projects KT&G's consolidated revenue for 2026 at 6.9 trillion won, up 6% year on year, with operating profit of 1.497 trillion won, an increase of 11%.