Auto Parts Stocks Lagging Behind OEMs... "Mando Worth Investing for Long-Term Growth"

Hyundai Motor up 24%·Kia up 43%, Mando rises only 13% in H1
Brokerage firms say "Diversification of sales including EV parts"

[Asia Economy Reporter Gong Byung-sun] This year, Mando has shown a weaker stock performance compared to automakers. However, experts advise investing in Mando from a long-term perspective considering its market position.

On the 14th, Mando opened the market at 62,900 KRW, up 300 KRW (0.49%) from the previous day. Although it had fallen for five consecutive trading days since the 5th, it rose for two consecutive days starting from the 12th.

Despite recent signs of a rebound, Mando's stock price has underperformed automakers this year. In the first half of the year, Mando rose 13.10%, while Hyundai Motor and Kia increased by 24.74% and 43.59%, respectively. This month, while Mando fell 5.86%, Hyundai Motor and Kia declined by only 3.97% and 1.90%, respectively.

Amid semiconductor issues, the nature of automotive parts companies being sensitive to fixed costs is interpreted as causing greater damage. Due to COVID-19 and natural disasters, automotive semiconductors became scarce, but Hyundai Motor and Kia overcame the crisis by utilizing remaining inventory and enhancing brand value. In contrast, automotive parts companies including Mando struggled with fixed cost burdens. According to a survey by the Korea Automobile Industry Association (KAIA), 67.4% of automotive parts companies responded that their business conditions worsened due to reduced deliveries.

Meanwhile, Mando underwent a stock price adjustment after a physical division. On the 9th of last month, Mando announced it would spin off its Advanced Driver Assistance Systems (ADAS) division to establish a new company. Shareholders opposed this. Unlike a spin-off where shareholders receive shares of the new company proportionate to their holdings (a human division), a physical division results in the parent company owning 100% of the new company’s shares. Additionally, concerns were raised that the corporate value would be damaged as the core ADAS business was separated. Indeed, the day after Mando decided on the physical division, its stock price plunged 11.17%.

However, the securities industry emphasizes that Mando should be approached from a long-term perspective. Considering its development and mass production capabilities, there is currently no company that can surpass Mando. Furthermore, Mando is pursuing sales diversification by securing customers outside the Hyundai Motor Group and expanding into eco-friendly vehicles. Park Jun-ho, a researcher at Hanwha Investment & Securities, explained, "From the second half of the year, production of electric vehicles with the dedicated electric vehicle platform (E-GMP) and Hyundai Motor’s Genesis will increase," adding, "Mando plans to supply parts to Indian original equipment manufacturers (OEMs) unrelated to Hyundai Motor Group and North American electric truck companies."

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