Hyundai Motor, Target Price Cut Amid Earnings Downgrade Due to COVID-19 Impact

Domestic and European Sales Expected to Decrease by 14% and 16% Year-on-Year
DB Financial Investment Recommends Buy, Target Price Set at 120,000 Won

[Asia Economy Reporter Minji Lee] Hyundai Motor is expected to record weaker-than-anticipated first-quarter results due to a decline in domestic and European wholesale sales. In response, DB Financial Investment has maintained a buy rating and lowered the target price by 14% to 120,000 KRW.

According to DB Financial Investment on the 4th, Hyundai Motor is expected to post sales of 22.7788 trillion KRW and an operating profit of 649.2 billion KRW in the first quarter, down 5% and 21% respectively compared to the same period last year. Operating profit is forecasted to fall short of market expectations (859 billion KRW) due to production disruptions caused by the spread of COVID-19.

Kim Pyeongmo, a researcher at DB Financial Investment, said, “Domestic and European wholesale sales in the first quarter decreased by 14% and 16% respectively compared to the same period last year,” adding, “Wholesale sales in most regions except North America declined, and the decrease in domestic sales, which have a high average selling price (ASP), will weigh on earnings.”

The company’s operating profit for 2020 is expected to reach 3.9401 trillion KRW. Due to reduced industrial demand caused by COVID-19, Hyundai Motor’s sales volume in all regions is expected to decline compared to last year. The company’s consolidated sales volume forecast has been lowered by 10% from previous estimates.

However, the increase in ASP driven by the full-scale launch of Genesis is expected to continue this year. Researcher Kim said, “In the case of the GV80, more than 25,000 contracts have already been recorded, with the average selling price of contracted vehicles exceeding 80 million KRW,” and added, “The G80, launched at the end of last month, recorded about 22,000 contracts in just one day, setting a new record for domestic new car contracts.”

Kim further explained, “The increase in ASP due to strong domestic sales of the Genesis brand and the diversification of the product lineup will be a pillar supporting earnings,” and noted, “Concerns about the impact of industrial demand shocks in North America and Europe have already been reflected in the stock price, and the situation will change depending on demand recovery after May.”