[Click eStock] "Hyundai Construction Equipment Expected to Perform Well Amid Raw Material Price Upcycle"

High-Margin Emerging Market Sales Expected to Expand
Shinhan Financial Investment "Commodity Prices to Continue Rising Until May"

[Asia Economy Reporter Gong Byung-sun] As raw material prices begin to rise, Hyundai Construction Equipment has emerged as a beneficiary company. With the increase in mineral extraction in emerging countries due to the strong raw material prices, sales in the construction equipment sector are expected to expand. If the U.S. Federal Reserve (Fed) undertakes additional asset purchases to stabilize interest rates, further increases in raw material prices are also anticipated. Accordingly, Shinhan Financial Investment has raised its target stock price from the previous 54,000 KRW to 58,000 KRW, maintaining a 'Buy' investment rating.

In the second quarter of this year, the rise in raw material prices due to a low base effect worked as a positive factor for Hyundai Construction Equipment, which exports to emerging markets. According to the Korea Resources Corporation, recently, the prices of iron ore and copper have increased by 60-90% compared to the end of February last year. Emerging countries handling raw materials have started purchasing construction equipment to increase mineral extraction. Hyundai Construction Equipment has been the beneficiary. On the 7th, Hyundai Construction Equipment announced that it had secured orders for a total of 104 construction machines in Qatar and Colombia. Hwang Eo-yeon, a researcher at Shinhan Financial Investment, predicted, “Sales expansion is expected in the high-margin emerging market regions, and sales of mining construction equipment will increase.”

The positive effect of rising raw material prices is expected to continue until May. Researcher Hwang said, “If the Fed undertakes additional asset purchases to stabilize interest rates, raw material prices are likely to rise further,” adding, “The rapid rise in raw material prices will continue until May, when the inflation base is low.” Furthermore, the expansion of fiscal policies across emerging countries, such as the full-scale implementation of fiscal policies following vaccine development in India, is also a positive factor for Hyundai Construction Equipment.

Reflecting this, Shinhan Financial Investment has raised the target stock price to 58,000 KRW. According to Researcher Hwang, the price-to-earnings ratio (PER) based on this year is 15.6 times, which is undervalued compared to the global industry average of 17.1 times, making an upward revision possible. Additionally, Researcher Hwang stated, “Hyundai Construction Equipment’s first-quarter sales this year are expected to be 827 billion KRW, up 30% year-on-year, and operating profit is expected to be 54 billion KRW, up 404.7% year-on-year,” adding, “This performance exceeds the market consensus operating profit of 34 billion KRW by 58.8%.”