[Click eStock] "Hyundai Motor, Strong Earnings Expected Despite Delayed Q4 Production Recovery"

KB Securities Report

On the 14th, KB Securities maintained its buy rating and target price of 285,000 KRW for Hyundai Motor Company. This is based on the judgment that operating profit will meet expectations despite delays in production recovery in the fourth quarter.

Hyundai Motor's operating profit for the fourth quarter is estimated to be 2 trillion KRW, a 57.9% increase compared to the same period last year. Wholesale sales of finished vehicles outside China in the fourth quarter are expected to fall short of previous estimates by 3.4%, and operating profit in the automotive division is analyzed to increase by 30.1% to 1 trillion KRW compared to the same period last year.

The operating profit forecast for the automotive division was lowered by about 13.2% from the previous estimate, reflecting the impact of semiconductor supply improvements falling short of expectations. The expected wholesale sales volume of finished vehicles outside China for Hyundai Motor in the fourth quarter is predicted to decrease by 14.7% to 852,000 units compared to the same period last year. On the other hand, due to the rise in used car prices, operating profit in the financial division is expected to increase by 17.3% (125.5 billion KRW) compared to previous forecasts, offsetting the downward factors in the automotive division's operating profit.

The investment point for Hyundai Motor is that operating profit is expected to increase by about 9% year-on-year next year due to growth in global sales outside China. Furthermore, despite intensified competition from production normalization, the impact on per-unit contribution margin decline is expected to be limited next year due to inventory reduction effects. Additionally, with further increases in used car prices, financial division profits are also estimated to exceed expectations.

However, there are concerns about a decline in performance. Operating profit could decrease more than expected due to reduced sales caused by inventory shortages. Seongjin Kang, a researcher at KB Securities, stated, "When wholesale sales decrease by 1%, operating profit is estimated to decrease by 252.6 billion KRW," adding, "A stronger-than-expected appreciation of the Korean won is also an issue; a 1% appreciation of the won would reduce operating profit by about 376.9 billion KRW." He further explained, "When competition intensifies due to production normalization, operating profit may be lower than expected; a 1% decrease in per-unit contribution margin would reduce operating profit by 252.6 billion KRW."

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