[Special Stock] Hyundai Motor and Kia 'Vroom Vroom'... Finally Accelerating with Earnings Surprise

[Asia Economy Reporter Lee Seon-ae] Hyundai Motor and Kia stocks have finally started to run. Their stock prices are rising together after recording an earnings surprise in the second quarter.

At 9:38 a.m. on the 25th, Hyundai Motor's stock price was 198,500 KRW, up 3.93% from the previous trading day, and Kia's stock price was 83,200 KRW, up 2.72%.

The rise in Hyundai Motor and Kia's stock prices is interpreted as being due to their second-quarter earnings exceeding market expectations.

Hyundai Motor recorded sales of 35.9999 trillion KRW, an 18.7% increase year-on-year, and operating profit of 2.9798 trillion KRW, up 58.0% in the second quarter. Net profit for the same period increased by 55.6% to 3.0848 trillion KRW.

Joo Soo-hong, a researcher at NH Investment & Securities, said, "Hyundai Motor's second-quarter earnings greatly exceeded our estimates," adding, "Although wholesale sales volume stagnated due to increased costs and geopolitical risks in Russia, profitability was favorable thanks to improvements in product mix and favorable exchange rates, which improved pricing variables."

He continued, "On a consolidated basis, we expect this year's annual sales to increase 16.0% year-on-year to 136.5 trillion KRW and operating profit to rise 52.9% to 10.2 trillion KRW," and added, "Although there are profitability burdens in the second half, considering that tight inventory levels will continue for a considerable period, the improvement in operating rates during the production recovery process acts as a buffer against peak-out concerns."

Kia recorded sales of 21.876 trillion KRW, up 19.3% year-on-year, and operating profit of 2.2341 trillion KRW, up 50.2% in the second quarter. Net profit for the same period was 1.881 trillion KRW, an increase of 40.1%.

Kim Yong-min, a researcher at Cape Investment & Securities, said about Kia, "Global backlog demand is approaching 1.1 million units," adding, "This is expected to absorb production volume for the next five months, and considering inventory demand, strong performance in the second half is guaranteed."

Moon Yong-kwon, a researcher at Shin Young Securities, said, "Kia surpassed operating profit of 2 trillion KRW for the first time in a quarter," explaining, "This is the result of an unprecedentedly favorable exchange rate effect, an increase in average selling price (ASP), and reduced incentives." He added, "In the second half, the effect of volume recovery will be added, and strong performance will continue," and evaluated, "The current stock price corresponds to a price-to-earnings ratio (PER) of 4.8 times in 2022, so there is also valuation attractiveness."