Hanon Systems Soars on Electric Vehicle Benefits, Has It Risen Too Much?

[Asia Economy Reporter Song Hwajeong] Hanon Systems, which recently surged due to the electric vehicle (EV) benefits, is showing signs of hesitation.

As of 9:45 AM on the 20th, Hanon Systems recorded 14,950 KRW, down 3.55% (550 KRW) from the previous day. After soaring more than 14% the previous day and hitting a new high, it appears to be taking a breather. During the previous day’s trading, Hanon Systems rose to 17,150 KRW, setting a 52-week high. Since the beginning of this month until the previous day, Hanon Systems has risen 38.39%.

The recent strength of Hanon Systems is interpreted as being due to expectations of benefits from electric vehicles. Jang Moonsoo, a researcher at Hyundai Motor Securities, analyzed, "Hanon Systems is expected to directly benefit from the expansion of EV demand linked to strengthened environmental regulations and the global Green New Deal." He added, "In particular, it is responding by securing most of the air conditioning parts for major EV platforms, not only for the domestic Hyundai Motor Group but also globally, which demonstrates its strong pricing and technological competitiveness." The volume of these air conditioning parts, which are key components determining the performance of eco-friendly vehicles expected to grow rapidly from 2015 to 2030, is anticipated to increase. As governments’ policies and automakers’ eco-friendly vehicle strategies are being accelerated, it is expected that supply shortages among key component suppliers and a favorable order environment will be maintained.

Orders related to eco-friendly vehicles are rapidly expanding. According to IBK Investment & Securities, Hanon Systems recorded a cumulative total order amount of 690 million USD through the third quarter, with 62% coming from outside Hyundai Motor Group and 83% consisting of eco-friendly vehicle parts. Lee Sanghyun, a researcher at IBK Investment & Securities, said, "Sales related to Volkswagen’s electric vehicle ID are expected to increase, and Hyundai Motor Group’s launch of EVs through a dedicated EV platform in 2021 will raise the proportion of eco-friendly vehicle parts sales to the 20% range." He added, "Currently, the operating profit margin for eco-friendly vehicle parts is 4%, while internal combustion engine parts are in the 8% range, but profitability is expected to reach the internal combustion engine level within a few years."

Recently, foreign investors’ buying momentum has continued, supporting Hanon Systems’ EV benefits. Foreign investors have net purchased Hanon Systems for seven consecutive trading days. During this period, foreign investors bought Hanon Systems worth 25.696 billion KRW.