[Click eStock] "Hanon Systems, Expectations for Future Electric Vehicle-Related Sales"

[Asia Economy Reporter Eunmo Koo] Hanon Systems achieved external growth in the first quarter of this year due to mergers and acquisitions (M&A), but operating profit declined due to the impact of the novel coronavirus disease (COVID-19). However, sales related to electric vehicles are expected to increase sharply in the future as key customers aggressively launch electric vehicles.

According to Korea Investment & Securities on the 14th, Hanon Systems' sales in the first quarter of this year reached 167.5 billion KRW, a 17.2% increase compared to the same period last year. On the other hand, operating profit was 59.7 billion KRW, showing a 36.1% decrease. Jinwoo Kim, a researcher at Korea Investment & Securities, explained in a report on the same day, "The proportion of sales to electric vehicles, a core growth driver, continued to rise to 15.6% (15% in Q4 2019, 14.4% in Q3), but the impact of COVID-19 became significant in China in February and in Europe and the United States from March." Hanon Systems' sales proportion in North America and Europe accounts for 70%. Therefore, the slower recovery from COVID-19 in Western countries compared to Asia is considered a burden. The company forecasted that operating losses in the second quarter are inevitable, with limited recovery expected in the second half of the year. The quarterly dividend per share for Q1 was 68 KRW, lower than the previous 80 KRW, but the dividend payout ratio significantly increased from 50% last year.

Hanon Systems plans to overcome the COVID-19 crisis through cost reduction and securing liquidity. Specifically, in terms of cost reduction, this year's facility investment will be reduced from the original 400 billion KRW to 300 billion KRW, and other costs will be cut by 250 billion KRW annually. Cash liquidity currently stands at about 810 billion KRW, with plans to secure up to an additional 350 billion KRW this month.

The stock price will be defended through shareholder returns via share buybacks and quarterly dividends. Researcher Kim stated, "Despite the impact of COVID-19, Hanon Systems demonstrated competitiveness by continuing to secure orders for GM's electric vehicle-dedicated platform vehicles in the first quarter," and forecasted, "Once the impact of COVID-19 subsides, Hanon Systems' sales to electric vehicles will rise even more sharply due to the aggressive electric vehicle strategies of key customers."

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