[Click e-Stock] "Hyundai Motor: Lower Expectations for New Businesses... Target Price Down"

On August 27, NH Investment & Securities lowered its target price for Hyundai Motor Company from KRW 760,000 to KRW 620,000, citing declining expectations due to the slow progress of new businesses such as physical artificial intelligence (AI). However, it maintained its 'Buy' investment rating.

Sky Ha, a researcher at NH Investment & Securities, stated, "Hyundai Motor is preparing to develop new businesses across the entire physical AI segment, including humanoids and autonomous driving, but the progress has been slower than market expectations. Even though external factors such as regulations are being rapidly addressed and improved, the company's progress lags behind that of competitors." He further explained, "Both the autonomous driving and robotics segments have high growth potential and earnings visibility, but unlike its peer group, Hyundai is still in the preparatory stage and the speed is slowing, so we applied a higher discount rate. In addition, as the KRW/USD exchange rate has fallen, we adjusted the average quarterly exchange rate, resulting in a downward revision of our 2027 earnings per share (EPS) estimate by about 6.5% compared to the previous projection."

The previous day, Hyundai Motor Company held its CEO Investor Day (CID) and raised its 2030 operating profit margin guidance from the previous 8-9% to above 9%. The company cited the improvement as being driven by a better sales mix from an increased mid-to-long-term share of hybrid vehicle sales, as well as improvements in cost structure. For the long term, it presented changes to its mobility profit structure. Analyst Ha said, "The profit margin of Hyundai's hybrid vehicles is now higher than not only electric vehicles but also internal combustion vehicles. As production volume increases annually, profitability is improving rapidly. In particular, sales prices are higher for mid- to large-sized models that are in strong demand in the U.S. market, so hybrid vehicle sales are expected to produce even higher profits. By 2030, the sales share of hybrids is expected to be the largest, with the resulting improved mix driving overall profitability."

In the long term, changes in Hyundai's profit structure are anticipated to enhance profitability. The company's revenue sources are forecast to diversify from the existing focus on complete vehicle and component sales, finance, and after-sales service (AS), to include software-defined vehicles (SDVs), robotaxis, and robotics. Ha noted, "New businesses are expected to record lower profitability in the early stages due to initial investment costs, but eventually will achieve higher profitability than Hyundai's traditional businesses. This is why it is more important to increase investments in new businesses and strengthen capabilities, rather than focusing solely on automotive R&D and sales."

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