[Click eStock] "Hyundai AutoEver, Mobilgene Sales Full-Scale Start"

One-time Incentives Lead to Q4 Operating Profit Decline
Hyundai Motor Securities "Maintain Hyundai AutoEver Target Price at 160,000 KRW"

[Asia Economy Reporter Gong Byung-sun] Hyundai AutoEver is expected to post fourth-quarter results last year that fall short of market consensus due to one-time costs. However, if the number of Hyundai Motor and Kia models equipped with autonomous driving increases, Hyundai AutoEver's software platform 'Mobilgene' is likely to benefit.

On the 7th, Hyundai Motor Securities estimated Hyundai AutoEver's fourth-quarter sales last year to be 618.9 billion KRW, up 38.8% year-on-year, and operating profit to be 23.3 billion KRW, down 12.1% during the same period. The operating profit is about 43.86% below consensus.

The decline in profit is attributed to one-time incentives. Additionally, the continuous recruitment of high-level personnel is also considered to have had an impact. However, sales from existing businesses such as system integration (SI) and IT outsourcing (ITO) are expected to increase by 14% year-on-year, while sales of navigation and Mobilgene are also beginning to ramp up. As a result, sales of automotive software in the fourth quarter last year are expected to exceed 110.2 billion KRW, surpassing 100 billion KRW for the first time on a quarterly basis.

The sales growth of Mobilgene is steep. Until the first half of last year, the average quarterly sales remained at 10 billion KRW, but it is expected to surge to 14 billion KRW in the third quarter and 24 to 25 billion KRW in the fourth quarter. The sales proportion within the automotive software business segment was about 10% in the second quarter last year but is expected to rise to 22% in the fourth quarter.

Hyundai Motor Securities analyst Kim Hyun-yong said, "From this year, the spread of Level 3 autonomous driving will accelerate, and Hyundai Motor and Kia will increase the number of equipped models by 2024." He added, "The global connected car base is expected to surge from 180 million units last year to 350 million units in 2024, and if the production of related vehicles by Hyundai Motor and Kia increases, the benefits will also grow." Connected cars refer to vehicles that are constantly connected to the internet.

Accordingly, Hyundai Motor Securities maintained its investment opinion of 'Buy' and target price of 160,000 KRW for Hyundai AutoEver. Analyst Kim explained, "With the spread of autonomous driving and connected cars, the sales proportion of automotive software is increasing centered on Mobilgene," and "existing businesses are also maintaining solid profitability." The closing price on the previous day was 133,500 KRW.