[Click eStock] Hanla Holdings Smiles as Mando Surges

Halla Holdings' Stock Price Rises Slower Than Mando's... 'Record Largest Discount'

[Asia Economy Reporter Minwoo Lee] The corporate value of Halla Holdings is expected to rise further following the sharp increase in the stock price of its affiliate, automotive parts manufacturer Mando.

On the 15th, Hana Financial Investment issued a 'Buy' rating on Halla Holdings and raised the target price by 36.2% to 64,000 KRW. The previous closing price was 40,600 KRW. This adjustment reflects higher-than-expected growth in the operating segment and a significant increase in the equity value of its subsidiaries.

In the fourth quarter of last year, Halla Holdings recorded sales of 237.2 billion KRW and operating profit of 47.3 billion KRW, representing increases of 18% and 159% respectively compared to the same period the previous year. In particular, its own business posted sales and operating profit of 189.7 billion KRW and 6.4 billion KRW respectively, up 12% and 2% year-on-year. Researcher Seonjae Song of Hana Financial Investment explained, "This was driven by growth in the European logistics and module sectors as well as the domestic imported car parts business," adding, "The decline in profitability compared to the previous year was due to a higher proportion of logistics sales to Mando, which has relatively lower margins."

Hana Financial Investment analyzed that two recent changes have significantly impacted the rise in Halla Holdings' corporate value assessment. First is the sharp rise in Mando's stock price. Halla Holdings holds a 30.25% stake in Mando. As of the 10th, Mando's market capitalization was 3.4138 trillion KRW, equating to about 1.0326 trillion KRW in value for Halla Holdings' stake. Considering Halla Holdings' market capitalization of 425.2 billion KRW on the 10th, this implies a discount of approximately 58%. Researcher Song pointed out, "From 2017 to the first half of 2020, the average discount rate was around 7%, but the surge in Mando's stock price combined with the sluggish rise in Halla Holdings' stock price has expanded the discount rate to an all-time high."

Another significant factor was Halla Holdings' sale of a 50% stake in Mando Hella, valued at approximately 82.5 billion KRW, to Mando. Mando Hella recorded sales of 687.4 billion KRW and operating profit of 21.3 billion KRW last year. It is a company expected to increase in corporate value due to high growth in driver assistance system (ADAS) parts such as sensors and electronic control units (ECU), and diversification of customers to local Chinese companies. Researcher Song noted, "Although selling Mando Hella at a somewhat low price has negative aspects, the sale was negotiated under the leadership of Hella, another major shareholder, and since the buyer was Mando, the increase in Mando's corporate value can offset this," adding, "However, the increased dependence on a single company, Mando, is a reason to raise the corporate value discount rate by 10%."

This content was produced with the assistance of AI translation services.