LS Securities on the 27th said Hyundai AutoEver's profit will grow larger on the back of new plant expansions, including the Robotics Meta-Plant Application Center (RMAC) and Robotics America, and the build-out of an artificial intelligence (AI) data center. It maintained a Buy rating and raised the target price 27.9% to 755,000 won from 590,000 won. The previous session's closing price was 638,000 won.
In the first quarter of this year, Hyundai AutoEver's year-over-year sales by segment were up 19% in system integration (SI) and 11.7% in outsourcing (ITO), while the vehicle software (SW) segment fell 0.7%.
LS Securities analyzed that in the first quarter this year, about 20 billion won in contracts in the enterprise segment were deferred to the second quarter, and profitability worsened due to higher SG&A from increased internal usage fees for Amazon Web Services (AWS) cloud and expanded research and development (R&D) investment.
Lee Byeong-geun, an LS Securities researcher, said, "Within the group, the transition to next-generation enterprise resource planning (ERP) is scheduled through 2028, and with the full-fledged shift to software-defined factory (SDF), growth in the enterprise segment will continue," adding, "In the second quarter, profitability will improve by 4.9 percentage points from the first quarter thanks to price increases and recognition of deferred sales."
However, for the vehicle SW segment, profitability is expected to deteriorate due to the impact of U.S. tariffs and intensifying price competition in the European market.
The researcher explained that while there is a short-term valuation burden, attention should focus on the momentum of its shift into a robotics SI company.
Hyundai AutoEver is reducing low-margin navigation and diversifying into infotainment software, and the mix improvement effect is expected to materialize in earnest toward the second half of this year.
The researcher said, "In new plant expansions such as RMAC and Robotics America and the AI data center build-out, Hyundai AutoEver's role in building IT systems is inevitable," adding, "Assuming Atlas's annual production at 30,000 units, Hyundai AutoEver's robot-related sales are estimated at about 1.6 trillion won and gross profit at 194 billion won." The researcher continued, "Considering the IT infrastructure build before Atlas production and the subsequent after-sales demand, the profit size will grow larger."