[Click eStock] Expansion of Chinese New Energy Vehicles... Expected Benefits for HL Mando and Hyundai Mobis

As consumption of new energy vehicles (NEVs) increases due to the Chinese government's 'Igu Hwan Sin' (replacement of old products with new ones) policy, domestic parts suppliers are expected to benefit.

On the 5th, Yoo Ji-woong, a researcher at Daol Investment & Securities, stated, "It is time to reassess investment points for parts companies. An increase in valuation (stock price relative to corporate value) driven by China is expected for HL Mando and Hyundai Mobis."

In July, China increased NEV subsidies through strengthened Igu Hwan Sin measures, accelerating the sales growth of local companies in the second half of the year. Last month, China's NEV retail sales reached 1,277,000 units, a 52% increase compared to the same period last year. By major companies, based on global total sales last month, BYD recorded 507,000 units, up 68% from the same period last year. Geely Automobile recorded 250,000 units (27% increase), Seres Group 37,000 units (55%), Xiaopeng 31,000 units (54%), and Nio 21,000 units (28.9%).

As new Chinese automakers establish mass production systems, demand expansion for companies with global parts supply chains excluding batteries is inevitable. BYD, Geely, and HIMA Group, which lead the electric vehicle and robotaxi sectors, are particularly demanding continuous partnerships with domestic parts companies.

Researcher Yoo emphasized, "Based on next year’s estimates, the PER (price-to-earnings ratio) of HL Mando and Hyundai Mobis are 7.3 times and 4.8 times respectively, representing historically significant discount levels."

He added, "HL Mando’s China business accounts for more than 20% of its sales, meeting the criteria for premium valuation. We expect nearly 10% sales growth next year," and said, "In the case of Hyundai Mobis, compared to HL Mando, its portfolio covers chassis and powertrain overall, so significant order momentum is expected in the future."