[Click eStock] "Hanon Systems, Performance Slump Expected Until Next Year... Target Price Down"

24/4Q Operating Profit Expected to Decrease by 35.3%
Decline in Shipments and Electric Vehicle Weakness Are Factors Worsening Performance

On the 9th, iM Securities downgraded Hanon Systems' target stock price from 6,000 KRW to 5,500 KRW. The outlook suggests that the tunnel of poor performance will continue until next year.

According to iM Securities, Hanon Systems' sales in the fourth quarter of 2024 are expected to reach 2.5 trillion KRW, a 2.2% increase compared to the same period last year. However, operating profit is projected to be 34.5 billion KRW, a 35.3% decrease, falling significantly short of market expectations (78.3 billion KRW). This is largely due to a 2.2% decrease in Hyundai Motor Group's shipment volume, which accounts for 47% of sales, as well as a 7.3% decline in electric vehicle sales. While the North American region saw positive effects from strong customer sales and favorable exchange rates, the recovery effect concentrated in the third quarter was absent in the fourth quarter.

In 2025, Hyundai Motor Group's sales target is expected to increase by 2.2%, with new production at the Georgia plant and system unit deliveries to Mercedes-Benz serving as drivers for performance improvement. However, the sluggish Chinese market remains a variable. Due to China's 'Yi Gu Huan Xin' (replacement of internal combustion engine vehicles with electric vehicles) policy, preference for local electric vehicles has surged, making it difficult for global companies to regain market share. Costs related to organizational efficiency improvements are also expected to continue in 2025.

Jo Hee-seung, a researcher at iM Securities, stated, "Despite profitability deteriorating since 2019 due to electric vehicle transition costs, Hanon Systems' oligopolistic position and technological capabilities in the thermal management components market remain solid." He added, "The company has prepared to improve its financial structure through large-scale cost recognition in the fourth quarter of 2024 and plans to focus on organizational efficiency and management normalization in 2025." From 2026, with the full-scale operation of the Georgia plant and system deliveries to Mercedes-Benz, performance improvement is expected to accelerate.