Kyobo Securities on the 24th lowered its target price for Hyundai Motor to 800,000 won from 900,000 won, citing slowing global market demand and cost pressures. However, it said the mid- to long-term growth potential remains intact, given the continued appeal of physical AI.
Hyundai Motor said the previous day that first-quarter revenue came to 45.9 trillion won and operating profit to 2.5 trillion won. Revenue rose 3.4% from a year earlier, but operating profit fell 30.8%, coming in slightly below market expectations.
Kim Gwang-sik, an analyst at Kyobo Securities, said, "With wholesale sales down 2.5% from the previous quarter, fixed expense burdens (247 billion won), increased incentives (300 billion won) to counter slowing demand and expand electric vehicle (EV) sales, and the impact of tariff (860 billion won) continued."
He added, "As the exchange rate rose 6.3% at the end of the quarter, one-off costs such as 270 billion won in promotional spending and about 250 billion won from the Middle East war and the suspension of Palisade sales were also reflected."
Still, profitability has room to improve gradually, according to the analysis. Kim said, "If the exchange rate falls, we expect a reversal effect on sales replenishment costs, and a cut in the tariff rate (25%→15%) will be fully reflected starting in the second quarter," adding, "Average selling price (ASP) may also improve as Palisade sales resume." He also projected, "With major new models launching in the second half, sales volume is expected to recover from the third quarter."
In particular, while rising raw material prices are a burden, they are a variable affecting the entire industry and could instead serve as an opportunity to expand market share. He explained, "Because these factors affect global OEMs across the board, they could be an opportunity for M/S expansion for Hyundai Motor, which has strong profitability defenses."
Ultimately, the key to long-term growth lies in securing data for "physical AI." Kim emphasized, "The bottleneck in implementing physical AI is a lack of data to advance the model," adding, "For big tech companies such as Nvidia and Google, the top priority is also securing partners that can obtain real-world data." He added, "Cooperation between Hyundai Motor and big tech is highly likely to deepen."
Related momentum is expected to concentrate in the second half. In June and December, new Alpha Mayo models (Super and Ultra) will be unveiled; Motional's commercialization in Korea and the United States is slated for the second half; and the opening of RMAC and finalization of the Atlas supply chain are scheduled for the third quarter. As a result, it is expected to be "a second half when both earnings improvement from new model launches and physical AI momentum can be anticipated."