[Click eStock] "Hyundai Motor, Expected to Record Highest Ever Operating Profit This Year... Target Price Up"

Meritz Securities maintained a 'Buy' rating on Hyundai Motor Company on the 11th and raised the target price from the previous 250,000 KRW to 280,000 KRW.

Hyundai Motor Company is achieving high profit growth by recording sales growth beyond expectations. Consolidated sales volume in the first quarter of this year reached 982,000 units, a 14% increase compared to the same period last year. Concerns about demand slowdown, which had intensified since the second half of last year, are disappearing. The quality is also robust. The incentive payment per vehicle in the first quarter of this year was $963, maintaining a stable trend compared to $901 in the first quarter of last year and $966 in the fourth quarter of last year.

[Image source=Yonhap News]

The current key keyword in the automobile industry is ‘Fleet’. Fleet refers to vehicle sales to rental car companies, corporations, and government agencies. The ‘mobility restrictions’ imposed over the past three years have been lifted in most markets worldwide. Travel and business trips have resumed, and taxi rides and ride-sharing calls, which were avoided due to infection concerns, have normalized. Although uncertainty about the economic direction has raised concerns about retail demand slowdown, the global recovery of ‘mobility’ is explosively restoring demand for commercial vehicles. Automakers are increasing operating rates to respond to the Fleet market, which is driving overall market demand, and are able to maintain low inventory and incentives by controlling supply to the retail market.

Accordingly, operating profit this year is expected to reach 11.1 trillion KRW. This represents a 13% increase compared to last year, which recorded the highest operating profit ever.

Junseong Kim, a researcher at Meritz Securities, said, “Currently, Hyundai Motor’s stock price is trading at about a 40% discount compared to the one-year forward price-to-earnings ratio (PER). Now, concerns are turning into expectations, and earnings upgrades and valuation normalization will accompany each other. We believe it is the right time to buy Hyundai Motor, which is a definite alternative in an uncertain market.”

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