"Hyundai Motor Company to Rebound in the Fourth Quarter After Bottoming in the Third"—Target Price Lowered

[Financial News] NH Investment & Securities on the sixth maintained its 'Buy' rating on Hyundai Motor Company but lowered its target price from 620,000 won to 540,000 won. The brokerage expects Hyundai Motor Company's third-quarter earnings this year to fall below market expectations due to production disruptions and cost pressures.
Haneul, an analyst at NH Investment & Securities, explained, "We reflected downward revisions to our medium- to long-term earnings estimates due to slower global wholesale sales and intensifying price competition. We also changed the peer group to Japanese companies with similar hybrid electric vehicle (HEV) competitiveness and profit structures."
Hyundai Motor Company's third-quarter revenue was estimated at 42.2232 trillion won, while operating profit was projected at 2.4028 trillion won. These figures represent year-on-year declines of 9.6% and 5.3%, respectively.
Analyst Ha said, "The labor union strike caused production disruptions of approximately 55,000 vehicles due to the suspension of operations at some plants, while the holiday period reduced the number of working days. As the rise in raw material prices during the first half begins to be reflected in manufacturing costs, pressure on profitability is expected to increase."
However, he expected the effects of exchange rates to partially offset the decline in earnings. He analyzed, "The average exchange rate in the third quarter rose from a year earlier, contributing to improved export profitability, while the period-end exchange rate fell from the end of the previous quarter, which is expected to result in a reversal of sales warranty provisions. Despite lower sales and higher costs, the decline in operating profit is likely to be limited."
For the fourth quarter, attention is focused on the normalization of production and the impact of new vehicle launches. Analyst Ha forecast, "Wholesale sales are expected to recover as production normalizes, while new vehicle launches should drive a rebound in earnings. The launch of the Ioniq 3 in Europe, the domestic Grandeur HEV, the new Hyundai Elantra, and the facelifted Hyundai Santa Fe will contribute to an improved sales mix."
He added, "The strength of the earnings recovery will depend on whether vehicles affected by production disruptions are sold at a later date, as well as trends in incentives and raw material costs."
[email protected] Joo Won-gyu Reporter