[Click eStock] “Hyundai Rotem, Target Price Lowered by 3.7%”

Sales Orders Increase but... Slow Profit Improvement
Daishin Securities Lowers Hyundai Rotem Target Price from 27,000 KRW to 26,000 KRW

[Asia Economy Reporter Gong Byung-sun] Daishin Securities has downgraded the target price for Hyundai Rotem. This is interpreted as a result of sales increasing while profits are improving slowly.

On the 20th, Daishin Securities maintained its investment opinion of "Buy" for Hyundai Rotem but lowered the target price by 3.7% from the previous 27,000 KRW to 26,000 KRW. The closing price on the previous day was 20,800 KRW.

Sales are observed to be increasing. In the railway sector, sales are also on the rise as backlog grows. No provision issues are expected, and some burden from rising raw material costs is reflected. The defense sector is also seeing increased sales along with backlog. It is expected to achieve orders worth 1 trillion KRW this year. The plant sector is experiencing a decrease in backlog, leading to a reduction in sales stagnation. Daishin Securities estimated Hyundai Rotem's Q4 sales last year to be 785.1 billion KRW, a 3% increase compared to the same period last year.

(Provided by Daishin Securities)

Orders are also increasing. Daishin Securities estimated Hyundai Rotem's orders last year to be 3.4 trillion KRW, a 22% increase compared to the previous year. The railway sector alone secured orders worth 1.3 trillion KRW in Q4 last year. This is interpreted as a premium for the expansion and oligopoly of domestic medium- and high-speed trains, including KTX-Eum.

Orders in the defense sector are estimated to have decreased by 25% to 1 trillion KRW compared to the previous year, but product diversification and project expansion are expected this year. Additionally, the plant sector is maintaining a profit trend and preparing to discover growth engines. Lee Dong-heon, a researcher at Daishin Securities, explained, "Rather than short-term performance, the industry's position in railways and K-2 tanks, as well as hydrogen new businesses, are leading Hyundai Rotem's stock price."

However, profit improvement is expected to be slow. Daishin Securities estimated Hyundai Rotem's Q4 operating profit last year to be 28.3 billion KRW, a 107% increase compared to the same period last year. However, this is 11% below the market consensus. The researcher said, "Provision issues and cost burdens remain."