NH Investment & Securities announced on October 6 that it has reduced its target price for Hyundai Motor from 620,000 won to 540,000 won, a 13% decrease. The previous closing price was 347,000 won.
The firm maintained its 'buy' rating but lowered the target price, citing expectations that Hyundai's third-quarter performance will fall below market consensus.
Analyst Hanul stated, "Hyundai's third-quarter revenue is projected to decline by 9.6% year-on-year to 42.2232 trillion won, while operating profit is expected to decrease by 5.3% to 2.4028 trillion won," explaining that these figures are below consensus estimates.
The poor performance in the third quarter is attributed to factors such as union strikes. Hanul noted, "Production disruptions due to union strikes have resulted in a loss of approximately 55,000 vehicles. Additionally, the reduction in working days due to holiday periods and the impact of rising raw material costs in the first half will further pressure profitability."
However, he added, "The average exchange rate in the third quarter has risen compared to the same period last year, contributing to improved export profitability. The end-of-quarter exchange rate has decreased compared to the previous quarter, which is expected to lead to a reversal of warranty liabilities, reducing the balance sheet liabilities and boosting profits." He believes that despite the decline in sales and rising costs, the decrease in operating profit will be limited.
Looking ahead to the fourth quarter, a recovery in wholesale sales and the impact of new vehicle launches are expected to boost performance.
In Europe, the Ioniq 3 is set to launch, while in South Korea, the Grandeur Hybrid (HEV), the new Avante, and the updated Santa Fe will be introduced, contributing to the anticipated positive effects of new models.
Hanul concluded, "The strength of the performance recovery will depend on the deferred sales of the production disruptions and the trends in incentives and raw material costs. There are also potential initial cost burdens associated with new model launches and fluctuations in warranty liabilities due to end-of-quarter exchange rates."
* This article has been translated by AI.
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