[Click eStock] "Hyundai Motor, Visibility of Profitability Improvement in 2020 Increases"

[Asia Economy Reporter Oh Ju-yeon] SK Securities maintained its 'Buy' rating and target price of 175,000 KRW for Hyundai Motor Company on the 28th, citing a high likelihood of improved profitability this year.

Hyundai Motor's Q4 results last year showed sales of 27.9 trillion KRW and operating profit of 1.2436 trillion KRW, representing increases of 10.5% and 148.2% respectively compared to the previous year, surpassing market expectations.

Researcher Kwon Soon-woo analyzed, "Although the automotive division reflected overall weak wholesale sales and costs related to ordinary wages, sales increased due to mix improvement centered on SUVs, reduced incentives, and a decline in exchange rates. Operating profit improved thanks to the mix improvement effect (318 billion KRW) and favorable exchange rate impact (352 billion KRW)." However, he expected continued weakness in China due to a decrease in equity-method income outside of operating profit.

Hyundai Motor's sales plan for this year is 4.576 million units on a wholesale basis, a 3.4% increase compared to the previous year. Researcher Kwon forecasted, "Although presented more conservatively than in the past, the improvement in average selling price (ASP) through mix improvement centered on SUVs is expected to offset this."

He stated, "The key point in the Q4 earnings announcement last year was cost," adding, "The cost of sales ratio, which can gauge the recovery of the core business, improved to 83.0% compared to both the previous year and the previous quarter, confirming that the effects of increased operating rates and cost reductions such as incentives are being gradually reflected."

He emphasized, "The visibility of profitability improvement in 2020 has increased due to improved operating rates through new model launches and expanded changed platforms, as well as the expansion of commonization."