Hyundai Motor, Q2 Earnings Expected to Hit Bottom... Will Recovery Come in the Second Half?

Hyundai's '2020 Veloster N' (Photo by Asia Economy DB)

원본보기 아이콘

[Asia Economy Reporter Kum Boryeong] Hyundai Motor's first-quarter performance was confirmed to meet market expectations, with analysis suggesting that the second quarter will be the low point.

According to DB Financial Investment on the 26th, Hyundai Motor's first-quarter results showed sales of 25.3194 trillion KRW and operating profit of 863.8 billion KRW. These figures represent increases of 6% and 5% respectively compared to the previous year, exceeding consensus estimates. On a consolidated basis, wholesale sales decreased by about 6% compared to the same period last year, but the negative impact of volume decline was offset by exchange rate effects due to the weak Korean won and mix improvement driven by increased SUV sales.

The issue lies in the second quarter. Considering the sharp drop in automobile sales in major Western European countries in March, it is analyzed that the sales decline due to the novel coronavirus infection (COVID-19) will be most severe this month. Kim Pyeongmo, a researcher at DB Financial Investment, explained, "Rather than expecting a V-shaped rebound after May, gradual improvement is anticipated," adding, "Accordingly, Hyundai Motor's consolidated sales volume in the second quarter is expected to decrease by 20% compared to the same period last year."

In the second quarter, hope must be placed on the domestic market. The domestic market, which has the highest average selling price (ASP), is showing the fastest recovery worldwide. Additionally, sales of the Genesis lineup are expected to be in full swing starting from the second quarter.

Kim Min-kyung, a researcher at Mirae Asset Daewoo, said, "Despite the slowdown in industrial demand, the first-quarter performance was defended through new car effects, mix improvement, favorable exchange rates, and reduced incentives." She added, "Concerns are high as the pandemic impact is expected to continue throughout the second quarter. Factors such as new car effects, mix improvement, and favorable exchange rates may persist. However, incentives are likely to increase, and fixed cost burdens due to reduced operating rates are expected to rise significantly. Cost management in the domestic market and mix improvement and incentive management in North America will be conditions for survival in the second quarter."

There is also an opinion that performance recovery is possible from the second half of the year after passing the low point in the second quarter. Jang Moon-su, a researcher at Hyundai Motor Securities, said, "We expect a rebound in momentum once the COVID-19 issue ends. We anticipate utilizing domestic production capacity (capa) capable of normal production once movement and production restrictions due to COVID-19 in each country are lifted," adding, "Compared to competitors who rely heavily on local production capacity for exports to major countries such as the U.S. and Europe, Hyundai Motor is expected to see an increase in market share."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.