[Click eStock] "Hyundai Mobis, Q1 Earnings Below Expectations"…Target Price Downward Revised

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment announced on the 26th that it maintains a buy rating on Hyundai Mobis despite the first-quarter earnings this year falling short of market expectations due to increased transportation costs, but it has lowered the target price from 390,000 KRW to 370,000 KRW.

Song Seon-jae, a researcher at Hana Financial Investment, said, "Although the poor performance will negatively affect the short-term stock price trend, considering that the cause of the poor performance is not structural and that the electrification sector continues to grow rapidly, it is expected not to last long," adding, "the mix improvement effect due to increased sales of high-end models by client companies and the strong growth in the electrification sector driven by increased electric vehicle sales by client companies remain valid."

Hyundai Mobis's first-quarter earnings recorded sales of 9.82 trillion KRW, up 17% year-on-year, and operating profit of 490.3 billion KRW, up 36%. Last year, due to the low base caused by COVID-19 and some parts shortages, production by major clients mainly in Korea and China increased, and the average selling price (ASP) rose due to the expansion of the proportion of high-end models, resulting in module assembly and parts manufacturing sales increasing by 20% and 10% year-on-year, respectively.

Electrification sales increased by 64% as production of eco-friendly vehicles by automakers rose 73% year-on-year, and supply of E-GMP (Hyundai Motor's dedicated electric vehicle platform) parts began. However, it was less than the expected 1.32 trillion KRW due to production disruptions of the drive motor.

After-sales (AS) parts sales decreased by 1% year-on-year due to a decline in the number of operating vehicles and negative foreign exchange effects, which was a smaller decline than the expected -6%. Also, the module segment was 1.2 percentage points lower than expected, which is analyzed to be due to increased shipping and air freight costs caused by COVID-19, as well as negative impacts from emerging market currency movements such as the Brazilian real and Russian ruble. The profitability of the electrification sector still records a single-digit loss.

Hyundai Mobis stated in a conference call that transportation costs will continue to have an impact in the second quarter, but they will minimize the impact through emergency management and cost reduction. Regarding the recent issue of drive motor production disruptions, it occurred due to delays in stabilizing foreign equipment caused by COVID-19, but since the operating rate is continuously rising, stabilization is expected from the second half of the year.