[Into the Stock] Hyundai Mobis, Bigger in Size but Lacking Substance

Hyundai Mobis Jua Stretch
Brokerages Lower Target Price
Profitability Challenged by Rising Costs

[Asia Economy Reporter Hwang Junho] Although Hyundai Mobis stock price has been steadily rising, securities firms have been lowering their target prices one after another. Analysts argue that unless there is a clue to improving the cost structure, it will be difficult to secure substantial profits even if the scale grows.

According to the Korea Exchange on the 31st, Hyundai Mobis stock price drew a gentle upward curve, rising from 204,500 won on the 15th to 213,000 won (4.15%). Despite net selling by institutions and foreigners, individuals gradually drove the price up by net buying worth 242.8 billion won.

However, securities firms lowered Hyundai Mobis's target price. This is based on the judgment that there is no way to mitigate the shocks caused by inflation that started in the second half of last year and the geopolitical risks that occurred last month. In the case of Hyundai Mobis's module division, more than 95% of sales come from Hyundai Motor and Kia. Due to inflation, costs are rising, but it is difficult to share this burden collectively with affiliates. After-sales service (A/S) parts are also sold to dealers, but price increases are difficult as they directly affect the price competitiveness of new cars.

Logistics costs have skyrocketed and show no sign of coming down. Hyundai Mobis's logistics costs surged by 390 billion won from 613 billion won in 2020 to 1.04 trillion won last year. The proportion relative to sales rose to 2.5% last year. It had been maintained at around 1.6?1.7% over the past 10 years. Over the past five years, research and development (R&D) expenses also expanded from 600 billion won (2016) to 1.1 trillion won (2021), increasing the proportion relative to sales from 1.7% to 2.8%.

Researcher Kim Junsung of Meritz Securities lowered Hyundai Mobis's target price from 300,000 won to 270,000 won, pointing out, "Although profits fluctuate depending on new car competitiveness, Hyundai Motor and Kia's operating profits increased by 13% and 114% respectively from 2010 to 2021, while Hyundai Mobis's decreased by 19%." He analyzed, "Despite steep sales growth, there is no promise of turning a profit in electrification business sectors such as battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV), and the endless rise in R&D costs without a link to return on equity (ROE) improvement." Researcher Lim Eunyoung of Samsung Securities also lowered the target price from 300,000 won to 245,000 won, stating, "It is difficult to pass on cost burdens to automakers, so annual profits are expected to stagnate around 2.5 trillion won until 2023." She added, "Due to the rapid transition to electric vehicles and inflation, investment points in Hyundai Mobis have become ambiguous," and downgraded the investment opinion to 'neutral.'

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