Shinyoung Securities said on the 8th that while expectations remain valid for Hyundai Motor's mid- to long-term future businesses such as robots, weak sales in the first quarter this year following the fourth quarter last year are disappointing. It maintained a "Buy" investment rating and a target price of 6.3 million won. Hyundai Motor's previous closing price was 473,000 won.
Shinyoung Securities forecast Hyundai Motor's first-quarter results at 46 trillion won in revenue and 2.4 trillion won in operating profit, down 33% from a year earlier.
Moon Yong-gwon, an analyst at Shinyoung Securities, said, "Due to sluggish sales in the domestic, European, Middle East, and Asia-Pacific markets, Hyundai Motor's global wholesale sales excluding China in the first quarter fell 2% from a year earlier," and noted, "The volume effect on operating profit will be a factor dragging earnings for two consecutive quarters."
On top of that, with the won-dollar exchange rate surging 6% from the fourth quarter last year, it is difficult to expect a favorable currency effect. Accordingly, first-quarter operating profit is projected to fall short of the lowered consensus (market average estimate), from the previous 3 trillion won to 2.8 trillion won.
Moon said, "While expectations for mid- to long-term future businesses such as robots remain valid, it is disappointing that sales were weak in the first quarter this year following the fourth quarter last year," adding, "Local U.S. sales also rose 1% in the first quarter and remain solid, but the temporary suspension of sales for two Palisade trims due to a recall and the increase in U.S. inventories from January through early March are the reasons the first-quarter North American wholesale sales growth slowed to 0.4%."
First, the resumption of Palisade sales in April was viewed positively. Moon said, "In addition, easing the fixed-cost burden at new-country and emerging-market plants is also necessary," adding, "Last year, the utilization rates at plants in Korea and Alabama, U.S., were 102% and 101%, respectively, but the Metaplant's rate was only 65% due to the halt of IRA subsidies."
Also, due to sluggish sales in the European and ASEAN markets, the utilization rates at the Czech plant, Vietnam plant, and Indonesia plant fell to 84%, 38%, and 47%, respectively, adding to fixed-cost burdens.
Moon said, "In this first quarter as well, shipments from plants in the Czech Republic, Turkey, Indonesia, and Vietnam continue to be weak, but we judge that European plant utilization will improve in the second half in line with new model launches."
The exchange rate is also expected to be important. The average won-dollar exchange rates in the second and third quarters last year were only 1,401 won and 1,386 won.
Moon said, "If the exchange rate holds around 1,500 won, we could once again expect a favorable currency effect," adding, "In the upcoming second quarter, the strength of the rebound in domestic demand and exports will determine the bar for results."