[Click eStock] "Hyundai Motor, Concerns Over Intensifying Global Competition... Investment Rating and Target Price Downgraded"

Kiwoom Securities has downgraded its investment opinion on Hyundai Motor from 'Buy' to 'Outperform' and lowered the target price from 295,000 KRW to 245,000 KRW, citing concerns over intensified competition risks amid stagnant automobile industry conditions this year.

On the 24th, Shin Yoon-chul, a researcher at Kiwoom Securities, stated in a report, "We are lowering the target price and investment opinion reflecting concerns over Hyundai Motor's margin contraction in 2025." He also noted that if aggressive 2025 earnings guidance is presented during the upcoming Lunar New Year holiday period by global competitors, Hyundai Motor's relative investment attractiveness could be temporarily weakened.

Previously, Hyundai Motor recorded 46.6 trillion KRW in sales for the fourth quarter of last year, an increase of about 11.9% year-on-year, but operating profit decreased by 17.2% to 2.82 trillion KRW, falling short of market expectations (sales of 44.8 trillion KRW, operating profit of 3.42 trillion KRW).

Researcher Shin explained, "The decline in profit in the automobile segment was the main cause of the deterioration in consolidated earnings." He added, "In particular, due to the weak Korean won at the end of the quarter, a quality warranty provision of 770 billion KRW was recorded, reflecting 1.253 trillion KRW in sales warranty expenses under selling and administrative expenses." Additionally, increased competition in the U.S. and Europe led to over 420 billion KRW in additional costs related to incentives in advanced markets, which was also cited as a cause for the decrease in operating profit.

The automobile industry outlook for this year also appears challenging. Researcher Shin noted that Hyundai Motor's projection of a 3-4% annual consolidated sales growth rate, similar to last year, seems to assume high growth in the financial sector and further increases in the global average selling price (ASP) of automobiles. However, he forecasted difficulties in achieving targets if production volume growth at the Georgia plant (HMGMA) in the U.S. does not support it. He pointed out that with the slowdown in the pace of global interest rate cuts, rising competition from companies in China and India, and the added tariff risks from the Donald Trump administration, a hit to earnings is inevitable.