[Click eStock] "SL Expected to Post Weak Q2 Results Due to U.S. Tariffs... Target Price Lowered"

On July 1, Daishin Securities stated that "SL's second-quarter results are expected to fall short of consensus due to the impact of U.S. tariffs," and lowered its target price by 8%, from 54,000 won to 50,000 won. The investment opinion was maintained as 'Buy'.

Kim Guyoun, a researcher at Daishin Securities, projected that "SL's consolidated results for the second quarter will show sales of 1.3 trillion won, up 1% year-on-year, and operating profit of 110.7 billion won, down 25%." Both the operating profit consensus (123 billion won) and the previous estimate (121.7 billion won) are expected to be missed. The operating profit margin (OPM) is projected at 8%.

The main reason for the weak performance is the imposition of U.S. tariffs. Researcher Kim analyzed, "Sales of CKD (completely knocked down) parts for the U.S. subsidiary amount to about 260 billion won annually, and a simple calculation suggests that annual tariff costs could reach about 67 billion won." She added, "It is possible that the impact of some tariffs has been reflected since the end of May."

By region, North American sales are expected to be relatively solid at 453.1 billion won (+6.0%), but sales in other regions are projected to decrease by 25% to 42.2 billion won. Sales in Korea and India are also expected to decline slightly.

However, expectations for earnings improvement in the second half of the year remain valid. Researcher Kim stated, "Sales of the Palisade full-change model in Korea and North America will begin in earnest in the second half, and benefits from cooperation between Hyundai Motor and GM are also anticipated." She added, "With the potential expansion of the robotics business, the company's mid- to long-term growth potential remains intact."

The target price was calculated by applying the average PER (price-earnings ratio) of 6.9 times during the previous profit stabilization period (2013-2017) to the average EPS (earnings per share) of 7,275 won for 2025-2026. Researcher Kim evaluated, "If tariff burdens across the industry are eased, SL could become the most notable parts supplier."