Meritz Securities analyzed on Oct. 20 that for HL Mando, the issues of tariff and valuation losses on investment assets would continue through the third quarter this year, followed by a benefit from expanded production by a North American smart car company starting in the fourth quarter. It lowered its target price to 55,000 won from 60,000 won while maintaining a "buy" rating. HL Mando's closing price in the previous trading day was 35,400 won.
Third-quarter results this year are weak. Reflecting the 25% tariff, about 20 billion won in operating expenses occurred, and there are also valuation losses from the iMotion investment that have continued since last year. Meritz Securities expected about 10 billion won in non-operating expenses to be reflected.
Kim Jun-seong, a researcher at Meritz Securities, said, "We lowered the target price to reflect the decline in the average valuation (corporate value) of the peer group in the parts sector," adding, "However, the U.S.-Korea trade negotiations are approaching an optimistic conclusion, and the possibility of an early sale of iMotion has also increased."
Meritz Securities projected that starting in the third quarter, HL Mando's corporate value would recover due to improved results. Mass production of the M3 and MY standard (low-priced) models began this month in the United States and Europe, and in China, mass production of the MY L (large) model began in Aug.
Kim explained, "Diversifying trims that adjusts price declines and space expansion leads to increased sales," adding, "Coincidentally, factories in Europe and China formalized capacity expansion starting in the fourth quarter this year." Since 2020, Mando's earnings growth has moved in step with the sales growth of a North American smart car company, implying it is expected to benefit.
Meritz Securities estimated that sales in the fourth quarter this year and next year would increase 9.5% and 8.6%, respectively, from a year earlier. Kim said, "A North American smart car company has launched a robotaxi, and initial service is underway through the MY to which Mando's chassis parts are supplied."
Kim added, "There is a possibility of being selected as the second supply vendor during the start of mass production of robotaxi-dedicated vehicles next year," and said, "If realized, it could be grounds for raising mid- to long-term sales estimates."