Hyundai Motor 4Q Operating Profit Soars 148.2% YoY
Kia Motors Also Up 73.6% YoY Operating Profit
Strong Performance Expected This Year... New Model Effect & Cost Reduction Synergy
[Asia Economy Reporter Minwoo Lee] Both Hyundai Motor Company and Kia Motors posted better-than-expected strong performances last year. The favorable exchange rate environment combined with the effect of new car models was significant. As the new car cycle fully arrives this year, it is expected that the strong performance will continue.
Hyundai Motor Group's luxury brand Genesis has officially launched its first SUV (Sport Utility Vehicle), the 'GV80'. On the 15th, Hyundai Motor Group held a new car launch event at KINTEX in Goyang, Gyeonggi Province, and began official sales. The photo shows the exterior of the GV80. / Goyang - Photo by Kim Hyun-min kimhyun81@
On the 27th, Hanwha Investment & Securities issued a 'Buy' investment opinion on Hyundai and Kia. This was because they judged that there is room for stock price rebound as profitability improvement of domestic automakers is expected this year.
◆ Hyundai Motor 4Q Operating Profit Soars 148.2% YoY = The strong performance of both companies began last year. Hyundai Motor's sales in the fourth quarter of last year increased by 10.5% compared to the same period last year, reaching 27.9 trillion KRW. The increase in operating profit was even greater. During the same period, it surged 148.2% to 1.24 trillion KRW. As a result, the total sales for last year were 105.79 trillion KRW, and operating profit was 3.685 trillion KRW. This showed growth of 9.3% and 52.1% respectively compared to the previous year. Dongha Kim, a researcher at Hanwha Investment & Securities, explained, "While the favorable exchange rate impact was a factor, the effect of new cars was significant due to better-than-expected product mix improvement and an increase in average selling price (ASP)." He added, "Especially, excluding one-time costs, the operating profit margin exceeding 5.0% for the first time in nine quarters is very positive, and considering the maximized new car effect this year, further profitability improvement is expected."
Hyundai Motor Group's luxury brand Genesis has officially launched its first SUV (Sport Utility Vehicle), the 'GV80'. On the 15th, Hyundai Motor Group held a new car launch event at KINTEX in Goyang, Gyeonggi Province, and began official sales. The photo shows the press crowding the launch event. Photo by Kim Hyun-min, Goyang kimhyun81@
Hyundai Motor's global sales target for this year is 4.58 million units (wholesale basis), up 3.4% from last year. The domestic market, where the individual consumption tax reduction benefit for new car purchases ends this year, and the European region, where product mix adjustments are required due to environmental regulations, have been reduced. However, targets were increased for emerging markets such as China, India, and Latin America, as well as the North American region where new car effects are expected. Excluding China (equity method reflected), the global sales target is 3.85 million units, up 1.9% from last year.
Through this, Hyundai Motor is expected to significantly increase profits again this year. Hanwha Investment & Securities forecasts Hyundai Motor's sales at 112.4 trillion KRW and operating profit at 5.4 trillion KRW this year. This represents a 6.2% increase in sales and a 47.6% increase in operating profit compared to last year. The target stock price was set at 160,000 KRW. The closing price on the previous trading day was 130,500 KRW. Researcher Kim explained, "As the proportion of new car sales increases and the number of models applying the 3rd generation platform grows, costs will also decrease." He added, "One-time costs will also decrease, leading to improved profitability."
◆ Kia Motors Also Raced Ahead... 4Q Operating Profit Up 73.6% = Kia Motors also posted strong results at the end of last year. In the fourth quarter of last year, sales were 16.1 trillion KRW and operating profit was 590.5 billion KRW. These figures increased by 19.5% and 54.6% respectively compared to the same period last year, exceeding market expectations. As a result, total sales for 2019 reached 58.146 trillion KRW, up 7.3% year-on-year, and operating profit rose 73.6% to 2.01 trillion KRW. Researcher Kim said, "The new car effect was significant in both the domestic and North American markets." He forecasted, "With the launch of new SUV volume models and increased operating rates at the India plant this year, it is expected that external growth accompanied by profitability improvement will be possible."
Kia Motors increased its global sales target for this year by 4.9% to 2.96 million units. Considering the introduction of new cars and increased operating rates at the India plant, it is judged that this target can be sufficiently achieved. The adjustment of sales volume by region was similar to Hyundai Motor. Domestic sales and Europe, where the individual consumption tax reduction ends and environmental regulations are involved, were reduced, but emerging markets such as China, India, Latin America, and North America were increased. Excluding China, global sales volume is 2.65 million units, up 3.4% from last year.
Hanwha Investment & Securities expects Kia Motors' performance this year to be sales of 61.125 trillion KRW and operating profit of 2.436 trillion KRW. This represents growth of 5.1% and 21.2% respectively compared to last year, indicating continued growth. The target stock price was set at 53,000 KRW. The closing price on the previous trading day was 43,400 KRW. Researcher Kim said, "The effect of introducing new main SUV models such as Sorento and Sportage was significant." He added, "Like Hyundai Motor, as the number of models applying the 3rd generation platform increases, costs will be reduced, and with the operating rate of the India plant rising, strong performance is expected due to these positive factors."
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