Kiwoom Securities analyzed that the favorable exchange rate effect and high profitability in the A/S institutional sector will drive Hyundai Mobis's strong performance. They maintained a target stock price of 350,000 won and an investment opinion of "buy." The closing price of Hyundai Mobis on the previous trading day was 251,000 won.
Kiwoom Securities forecasts that last year's fourth-quarter revenue will decrease by 0.4% year-on-year to 14.6 trillion won, while operating profit is expected to increase by 68% year-on-year to 862.2 billion won. Operating profit exceeds market expectations (786 billion won).
Shin Yun-cheol, a researcher at Kiwoom Securities, noted, "Although there are concerns about the expansion of warranty expenses related to the third recall of integrated charging control units (ICCU) decided last November, as liabilities are being assessed regarding the first and second ICCU recalls, if some of the warranty expenses are reversed, it can be expected to offset the situation."
In the fourth quarter, continued profitability in the module and core components institutional sector is anticipated, following last year's third quarter. However, the shipping volume of key customers in the fourth quarter has been sluggish, and the re-signing of the increase in freight charges with Hyundai Glovis, effective from the second half of last year, could act as a burden. Researcher Shin said, "The favorable exchange rate effect and high profitability in the A/S institutional sector are expected to drive Hyundai Mobis's strong performance in the fourth quarter of last year."
Hyundai Mobis stated earlier that it will apply a new shareholder return policy starting this year. Kiwoom Securities estimates that Hyundai Mobis will execute at least 1.3 trillion won in shareholder returns this year. Researcher Shin believes, "Particularly, the timing of stock buybacks and cancellations will be evenly distributed throughout the first and second halves of the year based on the current year's performance business plan, which will serve as an effective lure to enhance investors' attraction to continue holding Hyundai Mobis shares."
With about 7 trillion won in net cash held by Hyundai Mobis planned to be used for shareholder returns, if margin improvements accompany this, a steady upward trend in return on equity (ROE) is also expected. Researcher Shin said, "Starting from the fourth quarter of last year, the Advanced Manufacturing Production Tax Credit (AMPC) subsidies centered on Meta Plant America (HMGMA) will be reflected in profits, but as it is in the initial phase of plant operations, the scale will likely remain at the level of some tax credit deductions."
He added, "However, considering risk factors such as tariffs, the investment attractiveness remains higher than that of finished vehicles, and we maintain our sector's top stock opinion on Hyundai Mobis."