Why iM Securities Kept Its 'Buy' Rating on Hyundai Motor Company Despite Cutting Its Price Target from 650,000 to 600,000 Won

[Financial News] iM Securities cut Hyundai Motor Company's price target from 650,000 won to 600,000 won, reflecting weak Q3 sales and a decline in earnings per share (EPS), but forecast that earnings would normalize from Q4 as the impact of new models gained momentum and production disruptions were resolved. On the 15th, iM Securities maintained its 'Buy' rating on Hyundai Motor Company. The price target implies 56.9% upside from the previous day's closing price of 382,500 won.
iM Securities said, “The impact of new-model launches, including the Avante and Tucson, is expected to fully materialize from Q4, and issues related to production disruptions will also be fully resolved,” adding, “No one-off costs are expected to arise, so earnings are expected to normalize from Q4.”
iM Securities expects Q3 results to be somewhat weak. Revenue is estimated at 45.3 trillion won, down 2.7% from the same period a year earlier, while operating profit is projected at 2.4663 trillion won, a decline of 2.8%.
Global wholesale sales were estimated at 918,000 vehicles, down 11.5% year over year. The decline in the won-dollar exchange rate and one-off costs resulting from higher prices for key raw materials were also cited as headwinds.
Weak sales in Europe are also a challenge. Hyundai Motor Company's Q3 wholesale sales in Europe totaled 122,947 vehicles, down 18.1% year over year. iM Securities said Hyundai needs to expand its lineup of small- and mid-sized electric vehicles, beginning with the launch of the Ioniq 3.
As Chinese automakers continue to make inroads into the European market, iM Securities also pointed to the potential for Hyundai Motor Company's competitive edge, supported by its local production base, to stand out in the future.
iM Securities expects new-model launches and a return to normal production in Q4 to be key to an earnings rebound. It estimates full-year revenue at 187.3886 trillion won and operating profit at 10.9481 trillion won.
Operating profit is expected to fall 4.5% from the previous year, but rise 16.4% to 12.744 trillion won next year.
The decision to maintain the rating despite lowering the price target is seen as reflecting the potential for earnings to improve after Q4. Hyundai Motor Company's share-price performance going forward is expected to depend on whether the impact of new models materializes, the pace of production normalization, and whether sales recover in Europe.
[email protected] Kang Jung-mo Reporter