Automakers' Stocks See Broad Target Price Cuts as Brokerages Turn Cautious, but 'Future Growth Areas' Remain in Focus

[Financial News] Brokerage firms are lowering their target prices for automaker stocks across the board, adjusting their expectations downward. That is because Chinese companies are threatening the global market while earnings have also fallen short of expectations. Still, they say Kia's expansion in hybrid and electric vehicles, along with Hyundai Motor Company's robotics and AI momentum, remains intact and could support higher valuations over the long term.
According to FnGuide on the 14th, 14 reports cut Hyundai Motor Company's target price over the past month from the 13th of last month through the previous day, while 11 reports lowered Kia's target price during the same period.
Yuanta Securities Korea set the lowest target price for Hyundai Motor Company during that period, cutting it 17.39% from 690,000 won to 570,000 won. Hana Securities set the lowest target price for Kia, lowering it 13.63% from 220,000 won to 190,000 won.
The main reason cited was weak performance, including earnings that fell below market expectations. Hyundai Motor Company's consolidated operating profit for the second quarter came to 2.8509 trillion won, below the consensus estimate of 3 trillion won. Kia also posted operating profit of 2.629 trillion won in the second quarter, missing the consensus of 2.7935 trillion won. Operating profit at Hyundai Motor Company and Kia fell 20.8% and 4.9%, respectively, from a year earlier.
For Hyundai Motor Company, the decline was attributed to production disruptions caused by a parts supplier fire in the first half, as well as higher raw material costs and sales incentives. In addition, geopolitical uncertainty led to weaker sales in the Middle East. Kia saw operating profit shrink as it offered aggressive pricing and incentives in the domestic market and Western Europe.
Chinese automakers are also emerging as new competitors in the global market. According to foreign media reports, China's auto exports in July jumped 87.8% from a year earlier to 918,000 units. By contrast, data from the Korea Customs Service (KCS) on trade statistics for August 1-10 showed that auto parts exports fell 36.3% from the same period last year.
Im Eun-young, a researcher at Samsung Securities, explained, "The global mobility industry is undergoing structural change, and Chinese auto exports are rising sharply in particular." She added, "Hyundai Motor Company and Kia are facing price competition from Chinese electric vehicles."
Still, the brokerage community broadly agrees that earnings are now at a bottom. For Hyundai Motor Company, parts supply issues are expected to ease starting in the third quarter, and sales of flagship and new models could improve from the fourth quarter. Analysts also expect medium- to long-term growth from momentum in the AI robotics industry.
Nam Joo-shin, a researcher at DB Securities, said, "Hyundai Motor Company plans to make up for the production shortfall in the first half by expanding output in the second half." He added, "Since late May, Hyundai Motor Company has undergone an unusually sharp correction relative to the KOSPI, but its robotics and AI momentum has not been damaged. A revaluation of its valuation could be possible once related execution results are confirmed."
Kia is also expected to recover through a larger lineup of hybrid vehicles. Song Sun-jae, a researcher at Hana Securities, said, "Kia will stabilize its product mix by producing more high-margin hybrid models in the second half and will defend profitability by limiting electric vehicle incentives." He added, "In response to competition from Chinese companies, Kia is working to improve the competitiveness of its EV models and secure fundamental cost advantages, and it expects to see results starting next year."
[email protected] Im Sang-hyeok Reporter