Hankook Securities announced on July 14 that Hyundai Motor has experienced a decline in production of high-margin models due to supply chain disruptions with its partners, leading to an increased burden from sales warranty provisions. As a result, the firm has lowered its target price for Hyundai from 900,000 won to 780,000 won while maintaining a 'buy' rating.
Analyst Ma Geon-woo noted, "Wholesale sales, excluding China, decreased by 6.2% compared to the same period last year," adding, "Despite a favorable exchange rate environment, a decline in volume made a decrease in revenue unavoidable."
He further explained that the poor sales in the first half of the year were the result of a combination of operational disruptions in the Middle East, supply chain issues with partners, and gaps in new models of key volume products. However, he expressed optimism that the losses incurred from supply disruptions could be recovered through normalization of production and additional operations.
Ma also pointed out that rising raw material prices and the depreciation of the won have impacted profitability due to the burden of sales warranty provisions.
Hankook Securities projects Hyundai's consolidated revenue and operating profit for the second quarter to be 47.3 trillion won and 3 trillion won, respectively, marking a 17.1% decrease in operating profit compared to the same period last year.
Looking ahead to the second half of the year, a gradual recovery in performance is expected as the effects of new model launches take hold. Ma stated, "The new model effects of the Grandeur partial change (P/E) and the Avante and Tucson partial change (FMC) models, which began sales last month, are expected to be reflected sequentially."
Consequently, Hankook Securities forecasts that Hyundai's consolidated revenue for the year will increase by 3.9% year-on-year to 193.6 trillion won, while operating profit is expected to rise by 3.6% to 11.9 trillion won during the same period.
* This article has been translated by AI.
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