[Click eStock] "Hyundai Motor Nears Resolution of Tariff Uncertainty... Set to Close Gap with KOSPI"

On October 20, Kiwoom Securities maintained its "Outperform" (above market return) investment rating on Hyundai Motor Company and raised its target price from 260,000 won to 285,000 won, stating that "the U.S. automotive export item tariff will soon shift into the realm of 'certainty.'

On this day, Shin Yooncheol, a researcher at Kiwoom Securities, commented, "If, starting with the Asia-Pacific Economic Cooperation (APEC), the tariff is reduced from 25% to 15% within the year and the profit direction shifts toward growth, Hyundai Motor will begin to close the gap with the KOSPI index return in earnest."

Regarding the third-quarter results, he projected sales of 44.8 trillion won (up 4.4% year-on-year) and operating profit of 2.32 trillion won (down 35.2% year-on-year). These figures fall short of the market consensus, which expects sales of 45.2 trillion won and operating profit of 2.62 trillion won.

Shin explained, "The U.S. automotive export item tariff cost structure, which was confirmed at about 420 billion won per month in Hyundai Motor's second-quarter results, is expected to have continued in the third quarter as well. Reflecting this, the operating margin for the automotive division in the third quarter is projected to be in the low 4% range." He added, "While the average quarterly exchange rate of the won against the dollar was stronger year-on-year, the end-of-quarter rate was weaker, making it difficult to expect a favorable foreign exchange effect."

He particularly noted, "At present, among the top 10 KOSPI market capitalization stocks, Hyundai Motor and Kia are the only ones with expected earnings contraction. The reason the finished vehicle industry failed to attract investor attention during the KOSPI index's climb past 3,700 points ultimately lies in the environment where the earnings contraction caused by U.S. automotive item tariffs was too evident to ignore."

Shin emphasized, "If the item tariff rate is reduced to 15%, concerns about earnings contraction for domestic finished vehicle makers will be quickly resolved. Even just a tariff rate reduction would shift profits away from further contraction, at least maintaining this year's level."

He added, "With a relatively competitive new hybrid vehicle cycle, we can expect to expand market share in advanced markets and raise the average selling price. If this is combined with increased shipments from the Georgia plant in the United States and the new Pune plant in India, price, sales volume, and costs could all improve simultaneously. The profit outlook will shift toward solid growth."

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