[Click eStock] Hyundai Construction Equipment Raises Target Price but Maintains "Neutral" Investment Opinion

[Asia Economy Reporter Lee Seon-ae] On the 19th, KB Securities announced that it is raising the 12-month target price for Hyundai Construction Equipment from the previous 39,000 KRW to 43,000 KRW, an increase of 10.3%.

Jung Dong-ik, a researcher at KB Securities, explained, "This is the result of reflecting upward revisions in earnings estimates, changes in the period, changes in the yields of 1-year Monetary Stabilization Bonds and 30-year Treasury Bonds used as proxies for the risk-free rate and perpetual growth rate, and changes in beta." He added, "However, despite the target price increase, considering the limited upside potential of 8.3% (11.3% including dividend yield), the investment opinion remains Hold (Neutral)."

Hyundai Construction Equipment sold 382 excavators in the India market in April, achieving a market share of 19% and ranking first in monthly sales volume. This is the first time since entering the India market in 2008 that it has ranked first in monthly sales volume. The increase in sales was driven by special promotional programs targeting small excavators, strengthening A/S through CFT (Cross-Functional Team), production of locally customized equipment, and expansion of digital marketing in response to COVID-19. Additionally, parts sales reached 2.88 billion KRW in April alone, achieving the highest performance since the establishment of the local subsidiary.

In August last year, the Indian government announced the Gati Shakti plan, a massive infrastructure investment plan worth 100 trillion rupees (approximately 1,633 trillion KRW), aimed at job creation and expanding clean energy to achieve climate goals. As part of this, the budget for integrated planning and infrastructure development for railways and roads this year was allocated at 7.5 trillion rupees (approximately 123 trillion KRW), a 35.4% increase compared to last year. This move by the Indian government is expected to provide growth opportunities for Hyundai Construction Equipment's business activities.

In the first quarter of this year, excavator sales in China were 51,920 units, down 54.3% year-on-year. With city lockdowns continuing in April and May, sales recovery in the second quarter is also expected to be difficult. In addition to market contraction, Hyundai Construction Equipment's market share declined from 3.2% in the first quarter of 2021 to 1.9% in the first quarter of this year due to restrained responses to the highly competitive small and mini excavator market and strengthened accounts receivable management.

Researcher Jung emphasized, "Although the China proportion is lower compared to competitors, it is judged that confirmation of recovery in the Chinese market is a prerequisite for full-scale investment."

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