[Click eStock] "HD Hyundai Electric, Accelerated Earnings Growth Expected This Year... Target Price Up"

Target Price Raised by 6.1% Compared to Previous
Comfortable Growth Expected Through the First Half of the Year

Shinhan Investment Corp. on the 5th forecasted that HD Hyundai Electric's performance growth will accelerate this year and raised the target stock price from 115,000 KRW to 122,000 KRW. The investment rating was maintained as 'Buy.'

Lee Dong-heon, a research fellow at Shinhan Investment Corp., said, "We raised this year's estimated earnings per share (EPS) by 20% and lowered the applied price-to-earnings ratio (PER) to reflect the maturing growth phase." He added, "Although the price-to-book ratio (PBR) has increased due to years of stock price appreciation, the return on equity (ROE) has exceeded 25% in this high-profit phase. If the annual order target of 3.7 billion USD is achieved, profitability improvement will continue until 2026."

HD Hyundai Electric recorded a surprise earnings performance in the fourth quarter of last year. The research fellow analyzed, "Fourth-quarter sales increased by 18% year-on-year to 797.3 billion KRW, and operating profit rose 143% to 124.6 billion KRW, with operating profit exceeding the consensus (average securities forecast) by 27%, marking an earnings surprise." He explained, "Seasonal peak demand, price increases, volume growth, and cost reductions were simultaneously reflected, achieving the highest quarterly performance ever."

There is a forecast that performance growth will accelerate this year. The research fellow stated, "Through 2022 and 2023, the average unit price is estimated to have increased by at least 30%, and this year, revenue recognition will be in full swing." He added, "Currently, the backlog contains no low-margin volume except for energy storage systems (ESS), so the possibility of profitability deterioration due to mix is low, and there is still a reversal of raw material provisions." He continued, "Considering short lead-time volume, it is possible to exceed the annual sales target of 3.3 trillion KRW. The favorable conditions in North America and the Middle East will continue, but factors such as the war and the North American presidential election are variables, so steady growth is expected until the first half of the year."