[Click eStock] "Hyundai Corporation, Profit Growth Continues... Target Price Up 20%"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on Hyundai Corporation on the 11th and raised the target price by 20% from the previous level to 24,000 KRW. This is based on the analysis that the company remains undervalued considering the continued improvement in its earnings.

On a consolidated basis, second-quarter sales reached 1.5949 trillion KRW, and operating profit was 20.8 billion KRW, representing growth of 96% and 209% respectively compared to the same period last year. Both figures exceeded market expectations.

In the steel segment, the strong trading profits combined with the rise in oil prices significantly improved the profitability of the petrochemical segment to 1.1%. In the automotive parts segment, sales in Latin America were realized, and sales to the CIS region increased due to derivative effects from the Russia-Ukraine war. Automotive parts recorded an operating profit of 3.7 billion KRW in this quarter alone, surpassing last year's annual profit. The average oil price in the second quarter remained steady around 110 USD, and the average USD-KRW exchange rate rose to 1,261 KRW, leading to a substantial increase in resource development dividend income to 10.2 billion KRW.

However, in the steel segment, the decline in steel prices in advanced markets such as the US and Europe, where high prices and high margins had significantly contributed to earnings, is becoming evident. As a result, a decrease in profits compared to the first half of the year appears inevitable. The automotive parts segment is expected to maintain its earnings resilience as CIS-bound volumes continue into the second half of the year.

Researcher Taehwan Lee of Daishin Securities stated, “Although expectations will be lowered compared to the first half, the growth trend in consolidated profits compared to the previous year is expected to continue in the second half. Given the increased uncertainty in the existing business portfolio, early concretization of new businesses is anticipated to establish a stable growth foundation.”