[Click eStock] Hyundai Wia, Q1 as the Low Point 'Recovery of Growth Visibility'

NH Investment & Securities announced on the 27th that it maintains a buy rating and a target price of 73,000 KRW for Hyundai Wia.

It is forecasted that the first quarter sales will reach 2.095 trillion KRW, a 9.9% increase compared to the previous year, while operating profit is expected to be 50.9 billion KRW, a 1.0% decrease year-on-year, with an operating profit margin of 2.4%. This falls short of the consensus estimates. The reason the automotive division's operating profit margin did not meet expectations despite improved operating rates in the Hyundai Motor Group is largely due to shutdowns caused by adjustments in the mid-sized gasoline engine (Theta engine) production line.

Researcher Jo Suhong of NH Investment & Securities stated, "Due to weak demand and delays in the introduction of improved engines, Theta engine production is expected to decrease by 35% this year; however, a recovery is anticipated from the first quarter low on a quarterly basis."

The operating profit margin for the machinery division in the first quarter is expected to turn positive at 2.7%. The machinery division is undergoing profitability improvements following several years of restructuring. Additionally, momentum for new orders is expected to expand. First quarter new orders are projected to increase to approximately 390 billion KRW (compared to 200 billion KRW in the first quarter of last year). Of this, about 110 billion KRW is from defense, and approximately 150 billion KRW is related to Hyundai Motor's electrification investments in the United States. Sales growth in the machinery division is expected to begin in the second half of the year, with an expansion of growth anticipated in 2024. Mass production of cooling water modules (for target models EV9 and Kona EV) will commence from April.

Researcher Jo emphasized, "Although the contribution to sales is minimal, the shift from an internal combustion engine-centered business structure to electrification marks a significant change," adding, "The machinery division is also expected to regain growth visibility as recent expansions in new orders lead to gradual sales growth starting in the second half of the year."