[Click eStock] Hyundai Construction Equipment, Excessive Decline Compared to Competitiveness

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 15th that the governance issues regarding Hyundai Construction Equipment have been resolved for the time being, and it maintains a buy rating, judging that the recent decline is excessive compared to its competitiveness. However, the target price was lowered by 16.4% to 56,000 KRW.

Researcher Dongheon Lee of Daishin Securities explained, "The target price is based on an average earnings per share (EPS) of 8,261 KRW for 2021 and 2022, applying a target price-to-earnings ratio (PER) of 6.8 times," adding, "This reflects a 50% discount on the average PER of six global construction equipment companies."

The fourth-quarter earnings are estimated at sales of 810.1 billion KRW (up 17%) and operating profit of 32.1 billion KRW (up 153%). This exceeds the consensus by 10% in sales and increases operating profit by 1%.

With the sale of the parts business to the parent company Hyundai Genuine, ongoing sale of the industrial vehicle business, and planned acquisition of shares in Brazilian and Chinese subsidiaries expected to be reflected from 2022, the governance issues are considered to be resolved for now.

Researcher Lee emphasized, "Although the stock prices of peer construction equipment companies are declining due to the peak-out of the Chinese construction equipment market and the Evergrande default issue, Hyundai Construction Equipment has a large proportion of emerging markets outside China and is expected to have stable performance in 2022 compared to others," adding, "The recent price adjustment is judged to be an excessive decline relative to its competitiveness."

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