Will Auto Parts Stocks Bounce Back Despite COVID-19?

Increase Expected in China Car Sales and Domestic Genesis Production
Stock Price Rise Anticipated for Mando, Halla Holdings, SL, and Pyeonghwa Jeonggong

[Asia Economy Reporter Minji Lee] There is a forecast that the uncertainties faced by automobile parts manufacturers will be resolved quickly. This is based on the judgment that car sales in China and Genesis production are increasing.

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 GV80 is Genesis's first rear-wheel-drive based large SUV.
Goyang ? Photo by Kim Hyun-min kimhyun81@

On the 15th, Ebest Investment & Securities judged that the uncertainties of parts manufacturers with significant exposure to China and supplying key parts to Genesis are likely to disappear rapidly.

Researcher Ji Woong Yoo of Ebest Investment & Securities said, “Although there will be a time lag before consumer sentiment recovers in the US and European regions due to COVID-19, the core uncertainty factors in the automobile industry have been resolved.”

China’s average daily car sales are increasing. In the first week of March, the weekly average daily car sales recorded 16,000 units, showing an improving trend. The return rate of workers in the automobile industry has recently expanded to about 80%. Researcher Yoo said, “With the number of new COVID-19 cases virtually entering a lull, average daily sales are expected to show an upward trend for the time being.”

Production of the Genesis GV80 is also expected to increase. The annual production volume of the Genesis GV80 is around 50,000 units, but in February it was only 1,600 units. However, from this month, it is expected to produce more than 3,500 units through the new production of two gasoline engine trims, normal operation, and overtime work. Starting in early April, production of the new G80, which has received better design reviews than the GV80, is scheduled, and production and sales are expected to rebound.

Among automobile parts companies, stock price increases are expected for Mando, Hanla Holdings, SL, and Pyeonghwa Precision. Researcher Yoo said, “Although these companies’ stock prices have recently fallen due to high exposure to China, stock prices are expected to rise through the resumption of domestic and Chinese production and the sharp rebound in Genesis production,” adding, “In particular, from May onwards, additional expansion is expected for Genesis exports, which will lead to external growth.”