Hyundai Motor and Kia, Will They Continue as 'Value-Up Beneficiary Leading Stocks'?

Potential for Discount Reduction Remains After Recent Stock Price Rise
Still Attractive to Overseas Emerging Market Investors
Shareholder Return Policy Expected Ahead of Q1 Earnings Announcement

As the government has decided to promote the 'Corporate Value-Up Program,' the stock prices of Hyundai Motor and Kia, which surged last month, have recently remained within a trading range. Hyundai Motor and Kia are considered representative low price-to-book ratio (PBR) stocks. After a sharp rise in stock prices, they are taking a breather due to profit-taking. Regarding this, the Yeouido securities industry expects that the discount factors on domestic automakers' stock prices are decreasing, and there is potential for further increases.

According to the financial investment industry on the 6th, since the beginning of this year, Hyundai Motor's stock price has risen 38% from its low point (based on the closing price on the 5th), and Kia's has increased by 43%. Jang Moon-su, a researcher at Hyundai Motor Securities, analyzed, "Domestic automobiles have recently shown rapid stock price increases due to expectations for the 'Value-Up Program,'" adding, "It is a process of resolving valuation discount factors." He further stated, "The competitive environment has become more favorable compared to last year," and "Core technologies for alternative powertrains such as hybrid electric vehicles (HEV) are factors that quickly reduce the discount rate compared to overseas competitors."

Although recent sales performance of Hyundai Motor and Kia has been sluggish, overseas investors' interest in domestic automakers remains strong. Last month, Hyundai Motor's global wholesale sales, including China, recorded 315,000 units, down 4.1% year-on-year. During the same period, Kia recorded 243,000 units, a decrease of 4.6%.

Kang Sung-jin, a researcher at KB Securities, said, "Overseas investors met during last month's overseas marketing appeared to focus more on the undervaluation appeal rather than the slowdown in sales performance of domestic automakers," adding, "For some emerging investors looking to reduce their exposure to China, Korean automakers seemed to be regarded as undervalued stocks."

Expectations for shareholder-friendly policies by domestic automakers also remain high. Researcher Jang explained, "There is great anticipation for the government's willingness to boost stock prices by supporting the strengthening of shareholder return policies for companies with low PBR and high liquidity," adding, "There is a possibility that domestic automakers will strengthen their shareholder return policies."

Yoo Ji-woong, a researcher at Daol Investment & Securities, also said, "Kia's return on equity (ROE) is expected to reach 19.4% this year, and it is anticipated to have the highest margin compared to global competitors," adding, "Expectations for additional shareholder returns remain valid."

Although incentives have increased in the U.S. market, the continuation of a high exchange rate is considered a positive factor. Researcher Lim Eun-young of Samsung Securities analyzed, "The average industrial incentive in the U.S. in February increased by 72.7% year-on-year to $2,565 and has been rising for a year," but added, "This can be offset by the weak Korean won."

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