[Click e-Stock] "Hyundai Motor, Q2 Expected to Underperform Due to COVID-19... Stock Volatility↑"

[Asia Economy Reporter Minji Lee] Korea Investment & Securities maintained a buy rating and a target price of 110,000 KRW for Hyundai Motor Company on the 24th. Although a decline in sales volume is expected due to the novel coronavirus disease (COVID-19), the company’s record-breaking new car effect in the first quarter is considered noteworthy.

The first-quarter operating profit was 863.8 billion KRW, an increase of about 4.7% compared to the same period last year, exceeding market expectations by 21%. By segment, operating profits were 464 billion KRW for automobiles, 218 billion KRW for finance, 71 billion KRW for others, and a 5 billion KRW adjustment for consolidation.

Jinwoo Kim, a researcher at Korea Investment & Securities, stated, “This figure includes a one-time gain of 105.6 billion KRW from the sale of intellectual property rights to the autonomous driving joint venture established with Aptiv,” adding, “Excluding this, the operating profit is 758.2 billion KRW, reducing the extent to which it exceeds market expectations to 6%.”

The company forecasts a worsening sales slump and profitability deterioration in the second quarter due to the impact of COVID-19. Accordingly, while maintaining the policy of expanding shareholder returns, it plans to consider flexible policies in the short term given the challenging market environment. Regarding growing market concerns about the deterioration of the finance sector, the company expressed confidence, citing improvements in customer soundness and the current effective defense of used car residual values.

Researcher Kim said, “Until recovery becomes visible, the stock price is expected to go through a period of increased volatility,” and added, “Although sales volume estimates reflect the impact of COVID-19, continuous monitoring of profitability in the finance sector is necessary.”

Hyundai Motor Company is believed to have demonstrated a record-breaking new car effect if COVID-19 had not occurred. In fact, the new car effect within operating profit increased by 352 billion KRW compared to the same period last year. Researcher Kim forecasted, “Going forward, the company plans to focus on securing liquidity, inventory management, expanding production flexibility, and strengthening non-face-to-face sales,” and predicted, “Although a faster recovery than other competitors is expected, the key points to watch will be the U.S. launch timing of core new models such as the GC80 and Avante.”

This content was produced with the assistance of AI translation services.