[Click eStock] "Hyundai AutoEver, Benefiting from Subscription Services and Expansion of Autonomous Vehicles... Target Price 200,000 Won"

[Asia Economy Reporter Hyunseok Yoo] Shinhan Financial Investment analyzed on the 10th that Hyundai AutoEver's profitability will improve with the expansion of subscription services and autonomous vehicles. They newly issued a 'Buy' investment rating and a target price of 200,000 KRW.

Established in 2000, Hyundai AutoEver is an IT service specialist company within the Hyundai Motor Group. It provides integrated services including planning, construction, operation, and maintenance of information systems.

Shinhan Financial Investment expects Hyundai AutoEver's valuation to be re-evaluated as profitability recovers due to the expansion of autonomous driving and electronic components. Kangho Oh, a researcher at Shinhan Financial Investment, said, "The automotive market paradigm is rapidly changing. Over the next five years, with the expansion of electronic components, the demand for in-vehicle architecture will increase, leading to simultaneous growth in price and quantity."

"The number of electronic control units is expected to shift from a distributed structure to a domain-integrated platform, and the establishment of electronic software platforms will be a key factor determining future competitiveness in the automotive market," he added.

In particular, growth is expected across all fields including ITO (IT Outsourcing), SI (System Integration), and vehicle software. He explained, "The major platform 'Mobilgene' is noteworthy for its subscription-based revenue structure for software installed in vehicles in the future," adding, "The OTA integrated update revenue model allows revenue generation per vehicle, which is an advantage."

He further stated, "This will drive valuation rerating through profitability improvement and portfolio diversification. Vehicle software sales are expected to reach 474 billion KRW this year, a 74% increase compared to the previous year."

Oh also highlighted the high growth in the ITO and SI sectors. The expected sales for this year are 1.0461 trillion KRW for ITO and 798.1 billion KRW for SI, representing increases of 6% and 7% respectively compared to the previous year. He said, "With the paradigm shift in mobility industries such as automobiles and UAM, the cloud service market is also expected to expand," explaining, "The number of cloud-connected vehicles is projected to increase from 500,000 units in 2017 to 30 million units in 2025, which is why data center operation and management are expected to benefit from the expansion of vehicle data."

Due to the growth of business divisions, operating profit this year is expected to reach 119.1 billion KRW, a 24% increase from the previous year. He emphasized, "The expansion of vehicle software sales such as Mobilgene and navigation is expected to drive performance growth, and performance improvement through synergy with merged companies is also a key point," adding, "Operating profit margin is expected to increase by 0.3 percentage points to 5.1% this year, and the speed of profitability improvement will accelerate further with the expansion of subscription services and autonomous vehicles."