[Click eStock] Hyundai Corporation, Steady and Comfortable Earnings "Target Price Raised"

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 19th that it maintains a buy rating on Hyundai Corporation and raises the target price to 25,000 KRW. The target price was calculated by applying a target price-to-earnings ratio (PER) of 4.0 times to the 2022 earnings per share (EPS) of 6,323 KRW. The target PER is a 20% discount on the average 12-month forward PER of two domestic general trading companies (POSCO International and LX International).

Researcher Lee Tae-hwan of Daishin Securities explained, "Based on the improvement in trading conditions, a clear trend of earnings improvement continues," adding, "The target PER was discounted reflecting the delay in large-scale new business investments compared to the increased earnings stability."

The third-quarter earnings are expected to achieve consolidated sales of 1.664 trillion KRW (+60%), operating profit of 19.6 billion KRW (+82%), and controlling net profit of 17.3 billion KRW (+77%). These figures have been revised upward from previous forecasts. Despite the global price decline trend in the steel sector, the third quarter is expected to maintain solid performance without significant volume reduction by delivering mainly pre-ordered shipments. Passenger car parts sales in the CIS region are estimated to exceed second-quarter profits due to a rebound effect from the Russia-Ukraine war. With the semiconductor supply issue resolving and vehicle production largely normalizing, sales prospects beyond this year have also improved. The petrochemical business, traditionally strong during interest rate hikes, saw average crude oil prices fall about 10% compared to the second quarter but still remains at a high level. Considering OPEC+ production cuts and the possibility of U.S. strategic petroleum reserve replenishment, crude oil prices have a high potential for rebound. In the commercial energy and machinery & shipbuilding sectors, commercial energy recorded losses in the first half but is expected to turn profitable in the second half with rising sales, while machinery & shipbuilding is likely to continue its strong first-half performance. The resource development sector recorded dividend income of 18.7 billion KRW from mining rights in the first half (17.2 billion KRW in 2021), and unless crude oil prices fluctuate significantly, high dividend income at the first-half level is expected in the second half as well.

Lee said, "We conducted an NDR for domestic investors on the 13th and 14th, focusing on questions about the business composition of major divisions, trading outlook for the second half, Yemen LNG situation, new business investment plans, and dividend policy," adding, "New businesses involve small-scale equity investments in various sectors such as secondary batteries, vehicle parts, and food, and we are carefully considering companies requiring large acquisition amounts with flexibility."

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