[Click eStock] "Hyundai Wia, Expectations for Potential Mid- to Long-Term Business Structure Changes"

NH Investment & Securities Report

[Asia Economy Reporter Minji Lee] NH Investment & Securities maintained a buy rating and a target price of 130,000 KRW for Hyundai Wia on the 29th.

Researcher Suhong Cho of NH Investment & Securities stated, “Considering the internal combustion engine-centered business structure and uncertainties in the machinery business, the short-term performance momentum beyond the base effect is not significant,” adding, “In the long term, if additional new business achievements become visible, there is a high possibility of stock price increases beyond the recovery in automobile demand.”

Hyundai Wia succeeded in developing and securing orders for an integrated thermal management module for Hyundai Motor Group’s electric vehicle dedicated platform (E-GMP). Scheduled to be applied from 2023, this is seen as a visible result of the company’s efforts to diversify its business structure, which is currently centered on internal combustion engines.

Previously, the company announced plans for new businesses in the electric-powered vehicle sector, including the development of hydrogen storage systems and air compressors for hydrogen fuel cell vehicles. Development and order decisions are expected within this year, and if selected as a new business operator, valuation is expected to rise due to increased mid- to long-term credibility.

First-quarter sales and operating profit are expected to reach 1.7386 trillion KRW and 30.7 billion KRW, respectively. Sales are projected to increase by 5%, but profits are expected to decrease by 63% compared to the previous year. Considering the reversal of ordinary wages last year, the automobile division (57.6 billion KRW) is expected to recover profitability, while the machinery division (22.1 billion KRW) is expected to reduce its deficit. Researcher Cho explained, “Although Hyundai Motor Group’s global operating rate was favorable, poor performance in the China business and delayed profitability recovery in the machinery division are expected to change the results compared to previous forecasts.”

By division, first-quarter sales and operating profit for the automobile division are expected to be 1.5786 trillion KRW and 34.7 billion KRW, respectively, with sales increasing by 7% and profits decreasing by 54%. The machinery division is estimated to record sales of 160 billion KRW and an operating loss of 4 billion KRW, with sales expected to decline by about 9%.