[Click eStock] "Mando, Lighter Cost Structure in the Second Half"

[Asia Economy Reporter Eunmo Koo] DB Financial Investment analyzed that Mando's cost structure has lightened in the second half of the year due to the completion of voluntary retirement.

On the 10th, DB Financial Investment estimated that Mando's Q2 performance this year would see sales of 1.027 trillion KRW, a 30% decrease compared to the same period last year, due to a decline in the operating rates of domestic and overseas factories and one-time costs related to voluntary retirement. Operating profit is expected to turn to a loss of -53 billion KRW, falling short of the consensus (-39.4 billion KRW). Researcher Pyeongmo Kim of DB Financial Investment explained in the report, "Due to the impact of COVID-19, the operating rates of factories in North America and Europe fell below 50%, and sales in these two regions are expected to have decreased by more than 40% compared to the same period last year."

He added, "India is experiencing severe sluggishness, with zero vehicle sales recorded in April, so sales of the Indian subsidiary are also expected to decrease by more than 70% year-on-year," and explained, "The domestic factory's operating rate also declined due to a decrease in export volumes from domestic companies, and one-time costs related to voluntary retirement of about 55 billion KRW are also expected to be reflected."

This is an evaluation that the cost structure has lightened due to the completion of voluntary retirement. Researcher Kim said, "With the completion of voluntary retirement at the domestic factory, labor costs decreased by about 25 billion KRW annually," and explained, "China also lightened its cost structure through restructuring and line adjustments, and in Q2, the Chinese region's operating rate recovered to about 60% due to the normalization of customer production."

In the second half of the year, North American electric vehicle manufacturers' new sports utility vehicle (SUV) production will begin in earnest, and sales in North America are expected to quickly return to normal due to a rebound in customer production volume. Researcher Kim said, "With the lowered cost structure and sales recovery, second-half performance will meet consensus," but added, "However, considering the higher one-time costs compared to before, we are lowering this year's operating profit estimate by 14% compared to the previous forecast."

The investment opinion and target stock price were maintained at "Buy" and 32,000 KRW, respectively. Researcher Kim said, "Although one-time costs were somewhat higher than expected, the Q2 performance slump was already anticipated," and predicted, "On the other hand, since June, the operating rates of major overseas regions such as China, North America, and Europe are returning to normal, and in Q3, the recovery of volume at domestic and overseas factories will become visible."