[Click eStock] Hyundai Rotem, Target Price Downgraded

On the 19th, the 'K2NO,' a Norwegian version of the K2 tank, was exhibited at the Hyundai Rotem booth at the 'Seoul International Aerospace and Defense Exhibition 2021 (Seoul ADEX 2021)' held at Seoul Airport in Seongnam, Gyeonggi Province. / Seongnam - Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Junho Hwang] IBK Investment & Securities lowered the target price while expecting Hyundai Rotem's order performance on the 18th.

Hyundai Rotem recorded sales of 677.4 billion KRW and operating profit of 23.6 billion KRW in the first quarter of this year. This represents changes of 4% and -9% respectively compared to the previous year. Although operating profit decreased, the company maintained a profit trend for nine consecutive quarters.

By division, Rail Solution's operating profit increased by 15% year-on-year to 12.7 billion KRW, and Eco Plant recorded 300 million KRW, up 46% from the previous year. On the other hand, Defense Solution's operating profit decreased by 27% to 10.6 billion KRW.

New orders in the first quarter of this year increased by 54% year-on-year to 348 billion KRW, and order backlog expanded by 16% compared to the previous year to 9.9813 trillion KRW.

Hyundai Rotem is pursuing orders for Egypt Line 2/3 electric trains, Korail electric trains, EMU 320, GTX-C line, and Australian suburban double-decker electric trains. Order results are expected to appear from the end of the first quarter to the second half of this year.

Researcher Sanghyun Lee of IBK Investment & Securities maintained a buy rating and said, "The target price is lowered to 27,000 KRW," adding, "This is the result of applying a price-to-book ratio (PBR) of 2.2 times to this year's expected book value per share (BPS) (a 10% discount from the average highest PBR over the past five years)."