[Click eStock] "Hanon Systems, Dividend Policy Change a Double-Edged Sword... Target Price Down 19%"

Abolition of Quarterly Dividends Inconsistent with Value-Up Policy
Q1 Earnings Expected to Fall Short of Market Consensus
Profit Improvement to Take Time Due to Client Weakness

On the 18th, Kiwoom Securities maintained its investment opinion of 'Market Perform (Hold)' on Hanon Systems and lowered the target price by 19.1% from 6,800 KRW to 5,500 KRW. Hanon Systems' closing price on the previous trading day was 5,020 KRW.

Shin Yoon-chul, a researcher at Kiwoom Securities, stated, "The recent change in the existing dividend policy is unlikely to align with the value-up policies currently being promoted by financial authorities," adding, "Based on the adjusted market capitalization, there is a possibility that attempts to sell the major shareholder's stake in the company may be reignited. However, considering the major shareholder's tendency to hope for a 'fair price' even during periods when the valuation was much higher than now, a prolonged battle is expected." He analyzed the change in dividend policy as a "double-edged sword."

Hanon Systems announced a revised dividend policy last month. It plans to abolish the quarterly dividends implemented from 2016 through last year and instead decide on the payment and scale of dividends annually based on the yearly business performance. The company explained that this aims to "enhance shareholder value and return profits to shareholders based on the company's continuous growth, profitability, and capital structure stability." However, there was criticism that "abolishing quarterly dividends goes against the trend of domestic companies increasing dividends to expand shareholder returns."

Hanon Systems' first-quarter sales are estimated at 2.39 trillion KRW, with an operating profit of 61.7 billion KRW. This is expected to slightly underperform the market's profitability expectations (sales of 2.39 trillion KRW and operating profit of 70.8 billion KRW). Researcher Shin said, "Due to sluggish shipments of Volkswagen's ID series, the third-largest customer by sales, and ongoing inflationary pressure on aluminum raw material costs, it will take time to confirm a clear improvement in profits." It is expected that Hanon Systems will attempt to request compensation for cost increases from major customers, including Volkswagen, but the scale and timing are currently difficult to specify.