Newly Issued Bond: KT&G Corporation USD Bonds; IPG : 5.22%

KT&G’s new 3.5-year USD bond offers investment-grade quality, low leverage and improving profitability, though final pricing may tighten from initial guidance.

iFAST Research Team
iFAST Research Team13 Jul 2026Views
Newly Issued Bond: KT&G Corporation USD Bonds; IPG : 5.22%

  • KT&G Corporation (“KT&G”) plans to issue 3.5-year senior unsecured USD bonds. The reference initial price guidance is set at 5.221% (US 3-year Treasury yield + 95 basis points). Proceeds will be applied toward general corporate purposes. The issuer currently carries an A- credit rating (S&P); the new USD bonds are expected to receive the same A- (S&P) rating and will therefore rank as investment-grade.
  • KT&G was originally the state-owned Korea Tobacco Monopoly and was incorporated in April 1987. Headquartered in Daejeon, South Korea, the company is listed on the Korea Exchange under ticker 033780.KS and currently has a market capitalisation of approximately KRW 18.2 trillion. Its business is organised into four segments: tobacco (traditional cigarettes and next-generation products), health-functional products (flagship brand “CheongKwanJang” red ginseng), real estate, and other businesses (primarily pharmaceuticals and cosmetics). As the dominant player in the domestic traditional cigarette market, KT&G commanded a 68.8% market share in the first quarter of 2026.
  • For the full year 2025, total revenue rose 11.4% YoY to KRW 6.6 trillion, with EBITDA of approximately KRW 1.6 trillion and an EBITDA margin of about 24.8%. Momentum carried into 2026: first-quarter revenue increased 14.3% YoY to KRW 1.7 trillion, while the EBITDA margin expanded further to 26.0%. The improvement was driven primarily by a surge of nearly 600 million sticks in overseas sales volume of traditional cigarettes in 2025 (versus 5.9 billion sticks in 2024), together with product premiumisation and a rising mix of low-tar slim cigarettes. These factors lifted tobacco-segment margins and underscore the company’s solid overall profitability.
  • As of the first quarter of 2026, total debt stood at approximately KRW 1.75 trillion against cash and cash equivalents of about KRW 1.72 trillion, leaving the company in a near-net-cash position. It is worth noting that total debt has increased from roughly KRW 605 billion at the end of 2023 to the current level, largely reflecting debt-funded capital expenditure for overseas expansion (Kazakhstan and Indonesia). Capital expenditure amounted to KRW 790 billion in 2024 and KRW 630 billion in 2025. Even so, total debt/EBITDA remains only 1.0x, demonstrating robust debt-service capacity and providing a comfortable buffer for further overseas investment.
  • The new issue carries a 3.5-year tenor with reference guidance of approximately 5.22%. Considering KT&G’s leading position in the Korean traditional cigarette market and its consistently strong credit metrics, we view the new bonds as offering a degree of relative value for investors seeking stable returns. Investors should nevertheless note that the final pricing may not be as generous as the initial guidance.
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