Yuanta Securities Korea said on the 26th that the recent surge in Hyundai Motor's share price has been driven more by supply-demand shifts than by an improvement in earnings.
Kim Yong-min, an analyst at Yuanta Securities Korea, said, "Compared with the end of last year, this year's expected earnings per share (EPS) rose only 2%, but the share price jumped more than 70% over the same period," and noted, "Beyond the momentum from dividends and expectations for the value of the equity stake in Boston Dynamics (BD) highlighted after CES, the market is now in a phase where the valuation multiple itself is rising."
The diagnosis is that the recent share-price trend is being led by large net buying by retail investors. According to Yuanta Securities Korea, in January this year, individuals made net purchases of more than 3 trillion won of Hyundai Motor shares, while foreigners turned to net selling of a similar scale. As a result, the foreign equity ratio fell to 33% now from 36% at the end of last year.
In the end, Kim judged that attention should be paid to supply and demand rather than value. Kim said, "Retail net buying is driving the share-price gains, and foreigners are consistently taking profits," and added, "Because there is a lack of justification for raising valuation multiples that lag the sharp share-price rise, situational judgment is more important than a value view."
Kim cited as future share-price variables: ▲ additional events related to the Boston Dynamics equity stake ▲ conversion of the Georgia plant to hybrid production ▲ a slowdown in foreign selling.
Meanwhile, Yuanta Securities Korea raised its target price on Hyundai Motor to 600,000 won from 430,000 won. Kim said, "Based on the expansion of market share in the United States, we raised the price-earnings ratio (PER) multiple for the automobile institutional sector to 10 times and also raised the financial institutional sector to 12 times."
However, the value of the Boston Dynamics (BD) equity stake was not included. Kim added, "The logic of reflecting the BD equity value that emerged after CES has lost persuasiveness, and the stake indirectly owned through 'HMG Global' has very limited liquidity potential, and no one can pre-judge its value."