[Click eStock] "HD Hyundai Infracore, Solid Performance Despite Weak Market Conditions"

Q1 Sales and Operating Profit Down 10% and 39% Respectively
Possibility of Continued Weakness in Q2↑
"Advanced Demand Still Solid... Expecting Downside Rigidity"

Hana Securities analyzed on the 22nd that although there is uncertainty about the recovery in the second half for HD Hyundai Infracore, downside rigidity can be secured considering its solid performance. They maintained a 'Buy' investment rating and a target price of 11,000 KRW.

Researchers Yoo Jaeseon and Chae Unsaem from Hana Securities stated, "HD Hyundai Infracore's first-quarter performance fell short of consensus (market average forecast)," adding, "Compared to the same period last year, one-time gains and a high base effect were burdens, while demand in the construction machinery sector was sluggish." First-quarter sales amounted to 1.1573 trillion KRW, down 10.1% compared to the same period in 2022. Sales by region decreased by 9.4% and 15.8% in both developed and emerging markets, respectively. Operating profit also declined by 39.2% year-on-year to 92.8 billion KRW.

Due to dealers' proactive inventory reductions, the sluggishness may continue into the second quarter. However, final retail demand in North America remains solid, and although Europe is still weak, some leading indicators that precede construction machinery demand are recovering. The two researchers said, "With recent diminished expectations for interest rate cuts, there is uncertainty about recovery in the second half. However, considering solid demand in developed regions, overall dealer inventory levels, and stable growth in the engine sector, downside rigidity in performance different from past downcycles can be secured going forward."

They expect a solid performance trend through regional mix and business diversification, unlike in past downturns. Previously, a regional mix concentrated in China made it impossible to cover fixed costs when the Chinese market deteriorated, resulting in multiple quarterly operating losses. Currently, the construction machinery regional mix is approximately 60% emerging and 40% developed markets, with the proportion of developed regions significantly increasing compared to the past. Researchers Yoo Jaeseon and Chae Unsaem added, "Furthermore, within emerging markets, China's share has been dispersed to regions such as Asia, Latin America, the Middle East, and CIS. The engine sector is also expected to see stable performance growth due to future expansion in defense sector share and increased captive demand."