"Lowering Expectations: Why Are Target Prices for Hyundai Motor Group Stocks Being Cut?"

Hyundai Motor Group Accounts for 58% of Target Price Downgrade Reports
Operating Profit Declines Despite Q2 Revenue Growth
Hyundai Motor Company, Kia, Hyundai Rotem, and Hyundai WIA Face Profitability Challenges
Hyundai Mobis’ Strong Result

Recently, securities firms have been issuing a flurry of reports lowering target prices for major affiliates of Hyundai Motor Group following the announcement of their second-quarter earnings. Despite a year-on-year increase in overall Q2 revenue, backed by favorable exchange rates and expanding global sales, operating profit across the group’s companies delivered negative growth, falling short of expectations. This was due to a surge in incentives (sales support subsidies) in the North American market, increased costs related to US tariffs, and higher production costs. The financial community views the current wave of target price cuts as a “realignment of expectations” period that reflects short-term cost pressures, while focusing on whether new models in the second half of the year and robust order backlogs will drive a recovery in profitability.

According to financial information provider FnGuide on the 28th, of the 67 target price downgrade reports published since the 24th, 39 (58.2%) concerned Hyundai Motor Group affiliates, accounting for more than half. By stock, targets were lowered for Kia (10 reports), Hyundai Rotem (8), Hyundai Mobis (8), Hyundai Motor Company (7), Hyundai Wia (5), and Hyundai Glovis (1), showing a widespread downward revision across the group’s major subsidiaries.

Hyundai Motor Company achieved record quarterly revenue in Q2, with sales rising 1.9% year-on-year to 49.2153 trillion won. However, operating profit plummeted 20.8% to 2.8509 trillion won, missing the consensus estimate (the average forecast of securities analysts). Similarly, Kia posted record quarterly sales of 33.0371 trillion won, up 12.6%, but operating profit fell 4.9% to 2.6286 trillion won, also failing to meet expectations.

Strong sales of eco-friendly vehicles notwithstanding, ongoing US tariff costs continued to weigh on results. Hyundai Motor Company incurred tariff expenses of approximately 900 billion won in the first quarter and a similar amount again in the second quarter. Further, a sharp increase in sales incentives and marketing expenses in the North American market, along with higher warranty costs due to currency fluctuations, had an additional negative impact on profitability.

Haneul, a researcher at NH Investment & Securities, analyzed, “Car sales decreased due to parts supply disruptions and export restrictions to the Middle East, but the company attained record quarterly revenue thanks to favorable exchange rates. However, profitability was weak due to a deteriorating product mix caused by production disruptions and increased incentives in North America and Europe.” NH Investment & Securities lowered its target price for Hyundai Motor Company from 860,000 won to 760,000 won.

Hyundai Rotem saw Q2 revenue climb 13.3% year-on-year to 1.6061 trillion won, but operating profit dropped 9.8% to 232.4 billion won, missing consensus estimates. Jang Nam-hyun, researcher at Korea Investment & Securities, explained, “Hyundai Rotem’s Q2 operating profit was 14.1% below the consensus. Although revenue from the second phase of the Polish project expanded, the profit margin was lower than that of the first phase, resulting in a temporary slowdown in the defense segment’s operating margin.” Korea Investment & Securities reflected lowered earnings estimates by cutting Hyundai Rotem’s target price by 15.6%, from the previous level to 270,000 won.

The disappointing Q2 results and subsequent target price downgrades drove Hyundai Rotem to a session low of 128,100 won the previous day, marking a new 52-week low.

Of the major affiliates, only Hyundai Mobis succeeded in defending its performance. Hyundai Mobis reported Q2 revenue of 16.3247 trillion won and operating profit of 975.2 billion won, rising 2.4% and 12.1% respectively. It was the only major affiliate to achieve year-on-year growth in operating profit and to beat consensus estimates in Q2. Nonetheless, eight securities firms also lowered their target price for Hyundai Mobis. This was largely due not to weak performance, but to a reassessment of its fair value in line with declining valuations of global peers and the moderating pace of electrification. Researcher Ha explained, “We are cutting our target price by 18.4%, from 870,000 won to 710,000 won. Rising costs among global original equipment manufacturers (OEs) and delays or suspensions of electrification projects are slowing the shift to software-defined vehicles (SDVs). Expectations for the timeline of mass-producing humanoid robots have also been adjusted.”

This content was produced with the assistance of AI translation services.