[Click eStock] "Hyundai Motor, 1Q 'Surprise' Earnings... Stronger Performance Expected Than Concerns"

원본보기 아이콘

[Asia Economy Reporter Hwang Yoon-joo] Hana Financial Investment maintained its investment opinion of 'Buy' and target price of 260,000 KRW for Hyundai Motor Company on the 26th, stating that the company recorded an earnings surprise in the first quarter and is expected to continue solid performance despite concerns.

Song Seon-jae, a researcher at Hana Financial Investment, stated, "Improvements in mix including incentive reductions and price effects such as exchange rates offset the decline in global sales, resulting in first-quarter sales and operating profit of 30.3 trillion KRW and 1.93 trillion KRW, up 11% and 16% respectively compared to the same period last year."

Researcher Song explained, "Among the 2.91 trillion KRW increase in sales, the negative impact was a volume decrease (-1.24 trillion KRW), but this was offset by mix improvement (+2.4 trillion KRW), exchange rate increase (+1.21 trillion KRW), and growth in finance/other (+530 billion KRW)."

He analyzed, "Driven by top-line growth, the cost of sales ratio fell from 81.6% to 80.9%, which offset the increase in selling and administrative expenses ratio (12.3%→12.7%) caused by higher labor and marketing costs, resulting in an operating profit margin increase from 6.0% to 6.4%."

원본보기 아이콘

Researcher Song diagnosed, "Although there will be negative factors such as global parts supply imbalances and rising raw material prices in the second quarter, the low incentives amid supply shortages relative to finished vehicle demand, mix improvements based on SUVs and Genesis, and additional positive price effects from rising exchange rates will offset these."

He added, "If the supply disruption of automotive semiconductors eases in the second half, volume effects may also contribute as the currently high-priced reserved demand converts into sales."

Meanwhile, Hyundai Motor Company stated in its first-quarter conference call the previous day that although the business environment has worsened compared to the beginning of the year, it still maintains its operating profit margin guidance of 5.5% to 6.5%.

Regarding the temporary suspension of operations at the Russian plant, the company plans to reallocate parts exported to Russia to other regions to increase production there, while responding to the Russian plant situation through various cost reduction measures.

Considering the 3 to 12 months lead time for rising major raw material prices, the impact on costs will be reflected in a reduced manner, and the company mentioned it will minimize related effects through strategic procurement management systems including expanded direct purchasing and design reflecting cost increases.

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