[Click eStock] "Mando, Faster-than-Expected Industry Recovery Pace... Target Price Up 18%"

KB Securities Report
Q3 Operating Profit 45 Billion KRW

[Asia Economy Reporter Minji Lee] KB Securities maintained its buy rating on Mando on the 28th and raised the target price by 18% from the previous level to 39,000 KRW. This is based on the analysis that the business conditions are improving faster than expected, which could lead to increased earnings.

Mando's operating profit for the third quarter is expected to be 45 billion KRW, down 36% year-on-year. This exceeds the market forecast of 1.6 billion KRW and is expected to turn profitable compared to the previous quarter. Sales are projected at 640.5 billion KRW, 17% higher than the previous estimate (93.7 billion KRW), due to Hyundai Motor Company's domestic shipments expected to decline by only 5% year-on-year.

Third-quarter sales in China are expected to be 319.8 billion KRW, 2.7% below the previous forecast (0.8 billion KRW). Seongjin Kang, a researcher at KB Securities, explained, "Although sales volume from major Chinese customers is expected to increase significantly, parts demand is recovering more slowly than expected due to inventory depletion by companies," adding, "Sales in other regions are also believed to be recovering compared to the previous quarter."

Mando's annual operating profit for this year is forecasted to decrease by 71.2% year-on-year to 63 billion KRW. This reflects the impact of worsened operating results in the first half due to COVID-19.

Operating profit for next year is expected to increase by 6.7% from the previous forecast (303 billion KRW) to 324 billion KRW. Researcher Kang said, "With the rapid growth of the Chinese automobile market, Mando, which has significant sales to non-Hyundai affiliates in China, is expected to benefit," adding, "As exports of the new Genesis model equipped with Mando ADAS functions begin in earnest, awareness of ADAS capabilities is expected to improve."

He continued, "The growth of the electric vehicle market and a high window frame supply share to leading electric vehicle manufacturers provide opportunities to expand the customer base."