[Click eStock] "HD Hyundai Infracore, Recovery Expected After Second Half of Next Year... Investment Rating and Target Price Downgraded"

Target Price Lowered from 9,000 KRW to 7,500 KRW
Investment Opinion Downgraded from 'Buy' to 'Neutral'

On the 29th, KB Securities downgraded the target price of HD Hyundai Infracore from 9,000 KRW to 7,500 KRW, anticipating that a full recovery will be possible only after the second half of next year. The investment rating was lowered from 'Buy' to 'Neutral.'

Jung Dong-ik, a researcher at KB Securities, explained, "The target price downgrade reflects changes in earnings estimates due to weak third-quarter results and market slowdown, adjustments in the applied return on equity (ROE), and changes in the house-level market risk premium. With the target price lowered, the upside potential compared to the previous closing price is only 10.1%, which led to the downgrade in the investment rating."

HD Hyundai Infracore's third-quarter performance this year was weak, with sales down 15.5% year-on-year to 909.8 billion KRW and operating profit plunging 76.9% to 20.7 billion KRW. Researcher Jung analyzed, "Both sales and operating profit significantly missed consensus estimates (average securities firm forecasts). The construction machinery segment suffered from a global economic slowdown, delayed interest rate cuts, and election uncertainties, which worsened demand in North America and Europe. Additionally, increased promotion costs and rising logistics expenses resulted in an operating loss of 12 billion KRW, which was a major burden."

The Chinese market, which had experienced several years of sluggishness, appears to have bottomed out. In September, domestic excavator sales in China reached 7,612 units, a 21.3% increase compared to the same month last year, and cumulative sales from January to September totaled 73,972 units, up 8.6%. However, Jung noted, "HD Hyundai Infracore sold 1,719 units this year, a modest 6.5% increase year-on-year, causing its market share to decline from 2.4% last year to 2.3%."

The full recovery is expected to begin after the second half of next year. Jung forecasted, "In advanced markets, uncertainty remains regarding the scale and timing of interest rate cuts, along with uncertainties from the U.S. presidential election and prolonged Russia-Ukraine war leading to reduced infrastructure budgets, delaying recovery until the second half of 2025. Emerging markets are also expected to face further declines until the first half of 2025 due to global tightening, exchange rate instability, economic uncertainties, and expanding geopolitical risks."