Mando, New Car Effect and Overseas Sales Expansion... "Expecting Performance Improvement in the Second Half"

Shinyoung Securities Report
Expectations for China Growth and North America Sales Recovery

[Asia Economy Reporter Minji Lee] Mando's performance is expected to significantly improve in the second half of the year due to the new car effects of Hyundai and Kia vehicles and the expansion of overseas sales. On the 1st, Shin Young Securities gave Mando a buy rating and a target price of 37,000 KRW.

In the second quarter, Mando recorded sales of 1.013 trillion KRW and an operating loss of 75.9 billion KRW. Excluding one-time costs related to domestic restructuring and rationalization of production in China (53.3 billion KRW), the operating loss was 20.6 billion KRW. Thanks to increased sales to local Chinese companies, sales in China successfully rebounded.

Researcher Yongkwon Moon of Shin Young Securities explained, “The decline in domestic sales due to COVID-19 and the shutdown of Hyundai, Kia, and GM’s North American plants caused a decrease in North American sales, which were factors in the poor performance.”

ADAS (Advanced Driver Assistance Systems) sales decreased by 14% year-on-year due to sluggish export volumes caused by COVID-19, but its sales proportion increased to 15.1%. Domestic sales decreased by 295 billion KRW due to reduced export volumes, acting as the biggest factor in the decline of sales growth.

Sales in China decreased by 42% year-on-year in the first quarter due to the impact of COVID-19, but rebounded in the second quarter with demand recovery, turning profitable. Profitability of around 4% is expected in the second half. North American sales dropped about 50.8% year-on-year due to the shutdown of major customers’ North American plants. Indian sales decreased by 72.8% due to lockdown measures caused by COVID-19, resulting in a sharp drop in volume. New orders amounted to 2.5 trillion KRW, with corner radar orders worth 100 billion KRW for Hyundai Motor Group’s E-GMP platform and North American OEM-related orders including GM and Ford accounting for 70% of new orders.

In the second half, the new car effects of Hyundai and Kia and improvements in China and North America are expected to be reflected. Geely sales, which account for 31% of Chinese sales, rebounded after April, and the recovery of Geely sales due to the new car effect amid the base effect is a positive factor for the second half. Increased production at the Shanghai plant of North American EV manufacturers is also expected to contribute to growth in Chinese sales and profitability improvement.

Recovery of North American sales is also anticipated. This is due to the start of production of Kia K5 and Sorento and GM’s inventory expansion strategy, which is expected to improve performance. Researcher Moon said, “Due to strikes in the fourth quarter of last year and the impact of COVID-19 in the first quarter of this year, GM’s inventory decreased to 480,000 units,” adding, “GM, which accounted for 13% of Mando’s sales last year, announced during the second quarter conference call that it plans to increase dealer inventory to about 600,000 units by the end of the year, indicating production expansion in the second half.” Researcher Moon added, “ADAS growth is valid due to exports of GV80 and G80, production of K5 and Sorento in the U.S., and the launch of Carnival and GV70.”

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