[Click eStock] Hyundai Motor, Q3 Weakness Priced In...Approach from Bottoming Perspective

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment stated on the 27th that it maintains a Buy rating and a target price of 280,000 KRW for Hyundai Motor Company.

Although the third-quarter performance was sluggish due to intensified production disruptions caused by a shortage of automotive semiconductors, it met the recently lowered market expectations.

Song Seon-jae, a researcher at Hana Financial Investment, explained, "The production disruption issue has been continuously reflected in the stock price through monthly production and sales results, and with the easing of the Southeast Asia COVID-19 impact that worsened semiconductor supply shortages in August and September, an increase in production is also expected in the fourth quarter. The third-quarter poor performance should be approached from the perspective of having passed the bottom, but it is judged to be a limited momentum point as it will take time for semiconductor supply to normalize." He added, "Rather, within the competitive landscape of the automotive industry, the rise in electric vehicle market share and the internalization speed of autonomous driving technology are becoming important, so the year-end to early-year period when the monthly sales volume of the Ioniq 5 exceeds 8,000 units will act as an additional catalyst for growth."

Hyundai Motor Company revised its 2021 annual guidance announced last January. The sales target was lowered from the previous 4.16 million units to a new 4 million units due to COVID-19 and semiconductor issues, but the automobile sales growth rate was raised by 3 percentage points to 17?18% based on mix improvement and incentive reduction. The automobile division's profit margin target was also raised by 0.5 percentage points to 4.5?5.5%, and the FCF target was upgraded from the previous -0.8 to -2.4 trillion KRW to a new +2.0 to +3.3 trillion KRW. Investment amount was slightly lowered from the previous 8.9 trillion KRW to a new 8.0 trillion KRW. The dividend per share was reconfirmed to be at least at the same level as the previous year.

Although the automotive semiconductor supply issue is improving compared to the third quarter, it is still expected to take time to normalize. Hyundai recognizes that the 2025 eco-friendly vehicle sales target is conservative compared to the market environment and stated that it is internally revising its electrification acceleration strategy. Genesis brand sales are expected to increase by more than 10% in 2022 based on the GV60 and the new G90.