Hyundai Motor and Kia Soar in Stock Price Amid Record-Breaking Earnings

Hyundai Motor Company and Kia both recorded their highest-ever performance last year, leading to a significant rise in their stock prices after a long time. However, whether the stock prices will continue their upward trend, free from concerns about a peak-out (passing the high point) that had previously acted as a bearish factor, remains to be seen.

According to the Korea Exchange on the 26th, Hyundai Motor closed at 188,700 KRW, up 3,700 KRW (2.00%) from the previous day. Kia ended the day at 93,000 KRW, up 5.8%. Both stocks rose one rank in market capitalization due to the price increase. Hyundai Motor surpassed Celltrion to take 5th place, while Kia overtook NAVER to claim 7th place.

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This strong stock performance was due to record-breaking earnings. The previous day, Hyundai Motor and Kia announced their earnings for last year. Hyundai Motor reported consolidated sales of 162.6636 trillion KRW and operating profit of 15.1269 trillion KRW for the year, representing increases of 14% and 54% respectively compared to the previous year. This is the first time Hyundai Motor’s annual operating profit has exceeded 15 trillion KRW. Kia also posted its best-ever results. Kia’s sales last year rose 15.3% year-on-year to 99.8084 trillion KRW, and operating profit increased by 60.5% to 11.6079 trillion KRW.

Dividends reflecting these record earnings also positively influenced the stock prices. Hyundai Motor decided on a year-end dividend of 8,400 KRW per share for 2023, reflecting strong performance. The total annual dividend for 2023, including the combined 3,000 KRW dividend for the 2nd and 3rd quarters (1,500 KRW each quarter), was set at 11,400 KRW per share, a 63% increase from the previous year. This is the highest annual dividend amount ever. Kia announced it would repurchase 500 billion KRW worth of its own shares to enhance shareholder value and would cancel 100% of these shares if management targets are met by the 3rd quarter. Additionally, Kia set its year-end dividend at 5,600 KRW, up 2,100 KRW from the previous year.

However, despite the record earnings, it is uncertain whether the stock prices can maintain their strength. The record earnings last year were already anticipated, and concerns about a peak-out have continuously weighed on the stock prices. Kia’s stock price has fallen 7.83% from the 52-week high of 100,900 KRW recorded during trading on the 28th of last month. Hyundai Motor’s stock price has also dropped 7.27% since the end of last year. Considering the earnings peak-out, securities firms have lowered their investment opinions or target prices for Hyundai Motor and Kia this year. Hanwha Investment & Securities lowered Hyundai Motor’s target price from 300,000 KRW to 280,000 KRW, and Sangsangin Securities cut it from 310,000 KRW to 260,000 KRW. Meritz Securities downgraded Kia’s investment opinion from 'Buy' to 'Hold.' Kyobo Securities reduced Kia’s target price from 130,000 KRW to 110,000 KRW. Kim Seong-rae, a researcher at Hanwha Investment & Securities, said, "As global market demand growth has slowed since the second half of last year, sales growth also somewhat stalled in the latter half of last year. For this year’s industrial demand outlook, growth in key markets such as domestic, North America, and Europe is expected to be lower than the previous year, so performance improvement through sales growth will be limited."

In light of this situation, Hyundai Motor set conservative targets for this year. The annual wholesale sales target is 4.24 million units, a 0.6% increase from last year, with a consolidated sales growth target of 4-5% and an operating profit margin target of 8-9%. Nam Ju-shin, a researcher at Kyobo Securities, said, "The sales guidance of 4.24 million units this year reflects a conservative figure considering the slowing overall industry demand and weakening demand in domestic and emerging markets. Although incentives in the U.S. market continue to rise, inventory levels are below 1.8 months, so stable performance is expected through the first half of this year, and an annual profit level of around 15 trillion KRW can be maintained."

Kia set its sales target at 3.2 million units, up 3.6%, sales at 101.1 trillion KRW, up 1.3%, and operating profit at 12 trillion KRW, up 3.4%. Researcher Nam said about Kia, "Even assuming a conservative macro environment, strong performance will be evident through the first half of this year. Electric vehicle performance will drive stock price gains starting in the second half as EV 3, 4, and 5 lineups are added."

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