Hyundai Mobis and WIA, Once Hesitant... Rising Expectations for Q3 Earnings '↑'

Impact of Stabilization in Raw Material and Transportation Costs

[Asia Economy Reporter Yoo Hyun-seok] An improvement in the third-quarter earnings of Hyundai Mobis and Hyundai Wia, parts suppliers of Hyundai Motor Group, is expected. While Hyundai Motor and Kia recorded record-high earnings in the first half of the year, parts suppliers struggled due to burdens such as raw material and transportation costs. However, with an increase in finished vehicle production, a turnaround in earnings is anticipated in the second half of the year.

According to FnGuide on the 17th, securities firms estimate that the third-quarter sales of Hyundai Mobis and Hyundai Wia will be KRW 12.2665 trillion and KRW 2.045 trillion, respectively. This represents an increase of 22.79% and 15.53% compared to the same period last year. Operating profits are also expected to rise by 23.12% and 89.25%, reaching KRW 563.4 billion and KRW 59.1 billion, respectively.

In the second quarter, Hyundai Mobis and Hyundai Wia saw declines in operating profit and sales. However, with the stabilization of raw material and transportation costs, earnings are expected to shift to an upward trend. Raw material prices, which surged due to the Russia-Ukraine conflict, peaked in the second quarter and have since been declining. Additionally, the Shanghai Containerized Freight Index (SCFI) recently fell below 2000, reaching its lowest point of the year, leading to a steady decrease in transportation costs.

For Hyundai Mobis, growth in the electrification sector is anticipated. Hyundai Mobis's business is divided into four segments: electrification, parts manufacturing, module assembly, and after-sales service (AS). In the second quarter, sales in the electrification segment reached KRW 2.1011 trillion, a 54.1% increase compared to the same period last year, and growth is expected to continue in the third quarter of this year.

Hyundai Wia is also expected to continue sales of four-wheel-drive parts due to the popularity of sport utility vehicles (SUVs). The machinery business segment, which recorded a profit at the beginning of the year, is also expected to maintain its earnings.

Notably, the increase in production volume of Hyundai Motor and Kia in the third quarter is a positive factor. For parts suppliers, sales grow in tandem with the sales volume of finished vehicle manufacturers. From July to September, Hyundai Motor and Kia sold a total of 1,022,494 and 751,788 units domestically and overseas, respectively, marking increases of 13.75% and 9.86% compared to the same period last year. The imbalance in vehicle semiconductor supply has gradually improved, contributing to the increase in sales volume.

Lee Jae-il, a researcher at Eugene Investment & Securities, said, "We can confirm a gradual improvement in parts suppliers' earnings, overcoming the sluggish first half. The recovery in finished vehicle production, along with the effects of declining metal prices and transportation costs, is expected to be reflected." He added, "The cost reduction effect from long-term contracts will apply from next year, and raw material prices, which peaked in the second quarter, are expected to impact the third quarter with a time lag, leading to gradual earnings improvement."

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