Expected to Secure 8% of US Tractor Market in 2022
The author is an analyst of NH Investment & Securities. He can be reached at jack.baek@nhqv.com. -- Ed.
TYM’s tractor sales are growing explosively in North America. In line, the firm is expected to secure an 8% share of the US market in 2022. Once construction of its production facility in Georgia (40% of domestic capacity) is completed in 2023, it will boost the company’s North America sales portion. Following the addition of Branson, synergies are to be created in terms of production, distribution, and management
TYM USA (US subsidiary) and Branson (Kukje Machinery) to report explosive growth this year
By acquiring residual stakes in Kukje Machinery, which has a long history and acumen in engine production, TYM added the company as a wholly-owned subsidiary in 2021. Both the Branson brand under Kukje Machinery and TYM’s US subsidiary are achieving healthy earnings and profitability.
In 2Q22, TYM reported record-high earnings, with sales of W390.2bn (+58.2% y-y) and OP of W56.7bn (+134.1% y-y), backed by: 1) sharply increased brand (Branson) awareness over the past few years; 2) stable cost management thanks to favorable price negotiations with partners; 3) economies of scale (eg, in-house production of engines); and 4) a 5% ASP hike.
Focus on development of self-driving technology with wholly-owned subsidiary TYM ICT
From a long-term perspective, the key to expanding market share in the domestic agricultural machinery market will be securing competitive technologies for self-driving tractors. To that end, TYM is proactively developing self-driving tractor technologies with its subsidiary TYM ICT. As TYM ICT owns and develops telematics technology, TYM is in a better position to secure and utilize data.
In 2022, we forecast TYM to report significant y-y earnings growth, with sales of W1.21tn (+43.4% y-y) and OP of W100.2bn (+184.1% y-y). But, as the firm’s shares are trading at a 2022E P/E of only 4.2x, we see ample valuation merit. This year, there has been a strong correlation between TYM’s share price and agriculture product prices. In our view, considering that the chances of La Niña in 2H22 are over 50%, the prices of agriculture products are highly likely to rebound after a sharp decline since May.