[Click eStock] "HL Mando, Q1 Earnings Expected to Decline... Target Price Down"

Target Price Lowered from 59,000 KRW to 51,000 KRW

Shinhan Investment Corp. on the 14th lowered the target price for HL Mando from 59,000 KRW to 51,000 KRW, anticipating that the company's Q1 earnings this year will fall short of market expectations. The investment rating was maintained as 'Buy.'

Park Kwang-rae, a researcher at Shinhan Investment Corp., explained, "The target price was adjusted downward reflecting the recent stock price decline and increased cost of equity of leading North American electric vehicle companies," adding, "Concerns over short-term earnings weakness present an opportunity to increase holdings, as the current price-to-book ratio (PBR) of 0.6 times is at the same level as in 2020, indicating high valuation attractiveness."

Shinhan Investment Corp. expects HL Mando's Q1 earnings this year to show sales of 2.2 trillion KRW, up 4.4% year-on-year, and operating profit of 79.1 billion KRW, up 4.6%, both below market forecasts (sales of 2.21 trillion KRW and operating profit of 88 billion KRW). Researcher Park estimated, "The entry into a model change transition period for leading North American electric vehicle companies is likely to impact Q1 earnings negatively due to sluggish production and shipments," and analyzed, "The weak Q1 production performance of major global automobile manufacturers (OEMs) is also a negative factor, with delays in supplying some parts for North American-produced vehicles expected to increase fixed cost burdens."

Annual earnings for this year are projected at 9.3 trillion KRW in sales, a 5.0% increase year-on-year, and operating profit of 382 billion KRW, up 6.5%. Researcher Park stated, "The expansion of sales in high value-added parts such as Integrated Dynamic Brake (IDB), Electric Power Steering (EPS), and Electronic Suspension (SDC) will drive profitability improvements."

Monitoring the impact of U.S. tariffs is necessary. Researcher Park noted, "The tariff concern targets exports from Mexico to the U.S., with 30% of North American sales generated in Mexico, of which 40% are exported to the U.S.," and analyzed, "The amount is approximately 270 billion KRW (as of 2024), and since most are subject to the United States-Mexico-Canada Agreement (USMCA), the actual tariff impact is expected to be minimal."