[Click eStock] "Hyundai Motor Faces Inevitable Slump in Q1 Due to COVID-19 Production and Sales Disruptions"

[Asia Economy Reporter Koo Eun-mo] SK Securities forecasted that Hyundai Motor Company is expected to report poor performance in the first quarter of this year due to production and sales disruptions caused by the spread of the novel coronavirus disease (COVID-19). The investment opinion was maintained as 'Buy,' but the target price was lowered from the previous 175,000 KRW to 120,000 KRW.

On the 14th, SK Securities researcher Kwon Soon-woo estimated Hyundai Motor's first-quarter sales this year to be 21.9 trillion KRW, down 8.7% year-on-year, and net profit to be 624.6 billion KRW, down 34.5%. Researcher Kwon explained, "Despite a favorable KRW-USD exchange rate environment and mix improvement, poor performance is expected due to production and sales disruptions caused by the spread of COVID-19. Although the financial sector is expected to shrink in scale due to a decline in dealer traffic and wholesale sales despite inventory reduction, residual value increase, and the effect of selling non-performing assets."

Due to expected production disruptions and demand decline caused by the spread of COVID-19, the shipment forecast for this year was revised to 3.89 million units. The target price was changed from 175,000 KRW to 120,000 KRW, reflecting the downward revision of shipment and sales forecasts and estimates in the valuation. Researcher Kwon projected, "In the domestic market, where the temporary extension of the individual consumption tax cut is in effect, vehicles contributing to mix improvement such as the GV80, G80, and Grandeur are being sold. It is clearly positive that Hyundai holds stable cash flow and production bases compared to competitors. However, if the current issues prolong, intensified competition, profitability deterioration, potential restructuring, and increased credit risk are expected, making profitability and liquidity management increasingly important."

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