[Click eStock] "Hyundai Motor to Achieve Strong 2Q Performance... Benefits from High Exchange Rates and Incentive Reduction"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Myunghwan] Korea Investment & Securities announced on the 11th that it maintains a Buy rating and a target price of 260,000 KRW for Hyundai Motor. It also forecasted that Hyundai Motor will deliver significantly better-than-expected strong earnings in the second quarter of this year due to high exchange rates and reduced incentives.

Korea Investment & Securities expects Hyundai Motor's second-quarter earnings this year to significantly exceed market expectations. Considering the concerns over performance that grew throughout the second quarter due to external factors such as sluggish sales in April and May and the Cargo Solidarity strike, this is regarded as a surprise performance. Operating profit is expected to reach 2.4723 trillion KRW, a 31% increase compared to the same period last year, surpassing market expectations by 14.3%. The operating profit margin is also forecasted to rise by 1.2 percentage points year-on-year to 7.4%. Sales volume is projected to be 973,000 units in the second quarter, which is 7.2% lower than expected.

Korea Investment & Securities analyzed that Hyundai Motor's strong second-quarter performance was due to favorable exchange rates and improved product mix. The increase in operating profit from the average exchange rate is estimated at 470 billion KRW, mostly attributed to the rise in the KRW-USD exchange rate. The average KRW-USD exchange rate in the second quarter was 1,261 KRW, a 12.5% increase compared to the same period last year. The stabilization of emerging market currencies was also noted as a positive factor. Although the KRW-USD closing exchange rate rose 7.2% from the previous quarter, leading to an expected increase of 380 billion KRW in sales warranty provisions due to exchange rate fluctuations, the effect of the average exchange rate increase offset this.

The increase in operating profit from reduced incentives is also estimated at a record high of 620.8 billion KRW. This is because incentives per vehicle in the U.S. decreased by 71%, reaching an all-time low. Korea Investment & Securities explained that Hyundai Motor significantly reduced incentives in the U.S. compared to competitors, yet its market share has actually increased.

Korea Investment & Securities lowered Hyundai Motor's annual sales forecast by 2.5% due to supply chain disruptions in the second quarter. However, it raised the price forecast for this year by 6.8%, citing larger-than-expected incentive reductions and favorable exchange rates.

Researcher Jinwoo Kim of Korea Investment & Securities said, "Competition among automakers is expected to gradually resume in the second half of the year," but added, "Hyundai Motor is expected to raise its stock price to the next level by defending its market share."

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