[Click eStock] "Hyundai Mobis, Continued Weakness in Module Division"

Q2 Operating Profit 4.2% Below Consensus
Mid-to-Long-Term Profitability Improvement Expected in Electric Vehicle Sector

[Asia Economy Reporter Gong Byung-sun] Hyundai Mobis's operating profit for the second quarter of this year fell short of market expectations (consensus). While the after-sales service (AS) division performed well, the weakness in the module division is believed to be the cause. However, in the mid to long term, profitability improvements in the electrification division are expected to contribute to growth.

According to KTB Investment & Securities on the 26th, Hyundai Mobis's sales in the second quarter increased by 36.5% year-on-year to KRW 10.2851 trillion, and operating profit rose by 234% during the same period to KRW 563.6 billion. Sales exceeded the consensus of KRW 10.18 trillion by 1%. However, operating profit fell short of the consensus of KRW 588 billion by 4.2%.

The AS division showed strong performance. The AS division's second-quarter sales increased by 39% year-on-year to KRW 2 trillion, and operating profit rose by 67% during the same period to KRW 473.8 billion. This is attributed to a significant base effect as overseas regions, which were previously locked down last year, reopened. Lee Han-jun, a researcher at KTB Investment & Securities, explained, "The operating profit margin of the AS division is 23.5%, but excluding transportation costs, it can be raised to about 25%." Transportation costs for the AS division amounted to approximately KRW 30 billion.

However, the weakness in the module division led to results below consensus. The module division recorded an operating profit of KRW 89.3 billion, turning from an operating loss year-on-year, but the operating profit margin was weak at 1.1%. This was due to the continued burden of transportation costs from the first quarter, with the mode of transport changing from sea to air freight. Transportation costs for the module division amounted to about KRW 27 billion. Lee Han-jun of KTB Investment & Securities stated, "Although transportation costs are expected to ease in the second half compared to the first half, the burden of transportation costs may continue throughout this year."

However, profitability in the electrification division is expected to improve in the mid to long term. This is because sales of eco-friendly vehicles by clients such as Hyundai Motor Company are increasing. Although volumes are still insufficient, mass production of parts for the dedicated electric vehicle platform (e-GMP) has begun in earnest. Production disruptions of Hyundai Motor's Ioniq 5 drive motors normalized from last month, and supply is expected to increase in the second half of the year.

Accordingly, KTB Investment & Securities maintained its investment opinion of "Buy" on Hyundai Mobis with a target price of KRW 350,000. The closing price on the 23rd was KRW 279,000.

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