[Click eStock] "Hyundai Motor Faces Greater Interest Rate Hike Impact Than Expected... Target Price Down"

[Asia Economy Reporter Hwang Yoon-joo] Hyundai Motor Securities evaluated on the 26th that Hyundai Motor's third-quarter performance fell short of expectations due to the rapid interest rate hikes in the United States. Accordingly, the investment opinion was maintained as 'Buy,' and the target price was lowered to 240,000 KRW.

Jang Moon-soo, a researcher at Hyundai Motor Securities, stated, "The third-quarter operating profit decreased by 3.4% year-on-year to 1.55 trillion KRW," adding, "It fell short of recent market expectations (mid-3 trillion KRW range)." By segment, operating profits were recorded as follows: Automotive 1.09 trillion KRW (OPM 3.7%), Finance 378 billion KRW (OPM 6.5%), and Others 161 billion KRW (OPM 7.0%).

Researcher Jang explained, "Cost increases were larger than expected, and the impact of interest rate hikes caused profitability deterioration in Hyundai Card, Hyundai Capital, and Hyundai Capital America (HCA) to be worse than anticipated."

The one-time engine quality cost payment of 1.36 trillion KRW also posed a burden. Researcher Jang analyzed, "There was a time lag in passing on consumer prices, which shrank HCA's profitability," and "Profits were 300 billion KRW lower than expected, and cost increases were reflected at their maximum."

Researcher Jang pointed out that there are market concerns about business deterioration and profit decline due to rapid interest rate hikes and quality cost payments. He emphasized that it is important to determine whether a slight inventory rebound during the production stabilization process until the end of 2023 signals a transition to a structurally oversupplied market.

He diagnosed, "Unexpected quality costs and underwhelming performance amid uncertainties such as concerns over weakening automobile demand due to recession expectations in the second half of this year are negative factors for the stock price," but added, "However, there are currently no real indicators to judge demand contraction, and it is difficult to conclude that the supplier-favorable market we expect until the first half of next year will shift to a short-term oversupply situation."

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