11 Firms in One Day... Why Are Hyundai Motor's Target Prices Being Cut? [Click eStock]

Major domestic securities firms have cut their target prices for Hyundai Motor one after another. The cuts reflect assessments that the company’s third-quarter operating profit, which exceeded expectations, was supported by favorable exchange rates and cost reductions. Concerns about next year’s profitability have also grown after the company lowered its guidance for this year.

According to the securities industry on Nov. 3, 11 of the 18 research reports issued by major securities firms on Oct. 30, the day after Hyundai Motor released its third-quarter results, lowered their target prices. Mirae Asset Securities cut its target from 840,000 won to 650,000 won, while IBK Investment & Securities lowered its target from 670,000 won to 460,000 won. Kiwoom Securities and DB Securities each reduced their targets from 600,000 won to 500,000 won. NH Investment & Securities, Shinhan Securities, Hana Securities, Hyundai Motor Securities, Daishin Securities, Heungkuk Securities, and BNK Investment & Securities also joined the wave of cuts. Hyundai Motor’s share price has fallen nearly 20% in October alone.

The first reason securities firms have lowered their expectations is the downward revision to the company’s annual earnings outlook. In its third-quarter earnings presentation on Oct. 29, Hyundai Motor cut its global wholesale sales target for this year from 4,158,300 vehicles to 4 million. It also lowered its target for the consolidated operating margin from 6.3–7.3% to 5.5–6.5%. The revisions reflect slowing global demand, production disruptions, and rising raw material prices. The company also reduced its investment plan for the automotive division by 1.8 trillion won, from 17.8 trillion won to 16 trillion won.

Global wholesale sales in the third quarter totaled 921,000 vehicles, down 11.3% from a year earlier. Production disruptions caused by strikes at domestic plants and fewer working days weighed on sales. Cumulative wholesale sales for the first three quarters also fell 7% year over year to 2.887 million vehicles. Hyundai Motor needs a recovery in sales in the fourth quarter to meet its annual target, but analysts say the external environment remains challenging, with global auto demand slowing and competition among automakers intensifying.

“The global auto industry is undergoing broad valuation adjustments amid intensifying price competition and rising costs,” said Ha-neul, an analyst at NH Investment & Securities. Park Kwangrae, an analyst at Shinhan Securities, said, “Hyundai Motor’s guidance for its full-year 2026 operating margin has been lowered to 5.5–6.5%,” adding that “the share price is likely to remain volatile on its way up until an earnings recovery in 2027 is actually confirmed.”

Although third-quarter operating profit exceeded market expectations by more than 9%, some analysts say the details of the results offer little cause for reassurance. The positive effects of exchange rates and cost reductions largely offset weak sales and rising costs. In the third quarter, favorable exchange rates contributed about 1.3 trillion won to the automotive division’s profit, while cost reductions added 500 billion won. By contrast, lower sales volumes reduced profit by 1.1 trillion won, a less favorable sales mix cut it by 600 billion won, and higher raw material prices reduced it by 500 billion won.

Views on an earnings improvement next year are also becoming more cautious. Analysts say a recovery in sales alone may not be enough to boost profitability if the won strengthens and raw material prices continue to rise. Kiwoom Securities said it did not view the downward revision to this year’s guidance as a disappointment, but identified a stronger won and higher costs for key raw materials, including copper, as factors weighing on profitability this year.

Uncertainty over shareholder returns is also weighing on the share price. During its earnings conference call, Hyundai Motor said it planned to maintain a minimum dividend of 10,000 won per share, but left open the possibility of reviewing its existing shareholder return policy in response to a worsening business environment, including tariffs and strikes. “If net income falls short of the business plan, dividend payments could be maintained while share buybacks could be reduced,” said Shin Yooncheol, an analyst at Kiwoom Securities. Securities industry analysts say the possibility of smaller share buybacks could affect both earnings-per-share (EPS) estimates and investor sentiment.

Another point to watch is that controversy over “dual listing” surrounding SK hynix’s push to list its overseas subsidiary Solidigm eventually led to an announcement that the plan had been halted. Expectations for an initial public offering (IPO) by Boston Dynamics were one of the key factors behind Hyundai Motor’s share price gains in the first half of this year. Shin said, “There has recently been a case in which domestic financial authorities issued an authoritative interpretation concerning a domestic listed company’s plan to pursue an IPO for an overseas subsidiary.” He added, “Hyundai Motor Group’s share price had reflected expectations in the first half that it would pursue IPOs for overseas subsidiaries focused on Physical AI, but the group has now stated that it has no plans for overseas subsidiary IPOs.”

Nevertheless, the securities firms that cut their target prices have maintained their “Buy” ratings. Growing sales of hybrid electric vehicles (HEVs), the impact of new models, and the commercialization of the robotics business remain key investment points.

“HEV sales remain solid, particularly in North America, and the trend toward an improved sales mix is expected to continue as major new models are introduced in the second half and the electrified vehicle lineup expands,” said Lee Hyunwook, an analyst at IBK Investment & Securities. “In the medium to long term, the Physical AI business is also progressing as planned, including the expansion of robotaxi deployments and the commercialization of Atlas,” he said. “Despite slower sales growth in the short term, we believe the automotive business’s ability to defend profitability and the momentum of new businesses remain intact.”

“There are concerns about the unfavorable exchange-rate environment, the sustainability of contingency measures and cost reductions, and shareholder returns,” said Kim Jinseok, an analyst at Mirae Asset Securities. “In the short term, however, global robotics events are continuing, and investors should focus on the momentum around Boston Dynamics,” he added.

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