[Click e-Stock] "Hyundai Motor Company and Kia to Miss Earnings Expectations... Target Prices Lowered"

Hana Securities has lowered its target prices for Hyundai Motor Company and Kia to 5.1 million won and 1.7 million won, respectively. This adjustment comes amid expectations that third-quarter operating profit will fall short of previous estimates. However, the investment rating remains at 'Buy'.

On October 7, Hana Securities announced these changes in its automotive industry analysis report, stating that an earnings miss in the third quarter was an expected outcome. Consequently, the target price for Hyundai Motor Company was reduced from 6.5 million won to 5.1 million won, and Kia’s target price was adjusted from 1.9 million won to 1.7 million won. The previous day, Hyundai Motor Company and Kia closed at 3,485,000 won and 1,128,000 won, respectively.

Son Sun-jae, a research analyst at Hana Securities, commented, "While maintaining a Buy rating on Hyundai Motor Company and Kia, we have adjusted our target prices to reflect revised earnings estimates and reduced valuations of affiliated companies’ equity holdings." He continued, "For the third quarter, operating profits for Hyundai Motor Company and Kia are expected to amount to 2.23 trillion won and 2.29 trillion won, respectively, both falling short of prior forecasts."

He explained, "Consecutive quarterly earnings misses in the second and third quarters have resulted from a combination of industry factors, such as slowing demand and intensified competition; company-specific factors, such as production disruptions and aging models; and external factors like currency exchange rates and raw material costs." He further predicted, "While there has not been a clear improvement in industry factors, the sharp recent drop in the end-of-period exchange rate will negatively affect fourth-quarter results as the average exchange rate is expected to decline next quarter." On the other hand, he suggested that resolution of production disruptions, new model launches, and falling material costs are likely to contribute to an earnings recovery.

Hyundai Motor Company’s third-quarter revenue and operating profit were estimated at 44.9 trillion won and 2.23 trillion won, respectively. For the same period, Kia is expected to report revenue of 31.8 trillion won and operating profit of 2.29 trillion won.

Researcher Son also assessed that recent declines in automotive stock prices have already reflected factors such as lower sales volumes, earnings concerns, and weakening robotics momentum. He noted, "The 12-month forward price-to-earnings ratios (12MF P/E) for Hyundai Motor Company and Kia stand around 10x and 6x, respectively, which represents a modest undervaluation compared to the early 8x average of their global industry peers." He added, "From October onward, the establishment of RA, a production subsidiary of Boston Dynamics; finalization of its equity structure; supply chain setup; and the launch of major humanoid robots in the industry will serve as new stock price catalysts." He also expressed optimism that the release of SDV (software-defined vehicle) pace cars in 2027 could further strengthen the autonomous driving momentum.

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