[Click e-Stock] "Hanon Systems, Earnings Estimates and Target Price Downgraded"

Shinhan Investment Corp. maintained a buy rating on Hanon Systems on the 9th but announced, "Due to downward revisions in earnings estimates, the target price has been adjusted down by 17% from the previous level to 5,000 KRW." The closing price on the previous day was 4,065 KRW.

On the same day, Jeong Yong-jin, a researcher at Shinhan Investment Corp., stated, "Hanon Systems' greatest strength lies in proactively responding to regulatory changes in the automotive industry by possessing products that can overcome environmental regulations." He added, "However, the recent slowdown in electric vehicle demand and delays in the timing of European environmental regulations such as PFAS (per- and polyfluoroalkyl substances) have postponed the introduction of next-generation product lines. For the time being, internal cost reduction efforts will lead the turnaround."

In the second quarter of this year, sales increased by 5% year-on-year to 26 trillion KRW, while operating profit fell by 50% to 71.6 billion KRW, missing market expectations (operating profit of 81.9 billion KRW) by 13%. Researcher Jeong analyzed, "Sales growth continued due to favorable exchange rates and price increases resulting from changes in the product mix. However, profitability in key regions such as domestic, North America, and Europe remained at 1-2% due to a decline in operating rates caused by weak upstream demand."

Nevertheless, gradual profit improvement was achieved through cost-cutting efforts. Researcher Jeong added, "In the second half, profitability recovery is expected more from labor cost reductions (expected 20-25 billion KRW per quarter) and cost recovery activities for finished vehicles (expected 15-20 billion KRW per quarter) rather than volume improvements. The company appears to be focusing on strengthening its fundamentals amid sluggish market conditions."