Yuanta Securities Korea said on the 16th that Hyundai Motor's recent share price rise was based on expectations for growth in Boston Dynamics' position in the robot market, not a reappraisal of new businesses related to automobiles.
The target price was raised to 6.9 million won, but the investment rating was lowered to "Hold," saying a cautious approach is needed to a share price rise accompanied by a decline in the core business. Hyundai Motor's previous closing price was 647,000 won.
Kim Yong-min, an analyst at Yuanta Securities Korea, said, "Hyundai Motor's year-to-date share price rise is based on expectations for growth in Boston Dynamics in the global humanoid market, not a reappraisal of existing auto-related new businesses," adding, "There is no way to quantify it, but judging by the share price trend versus peers in the sector, it has logged a rise completely different from the automaker sector."
Accordingly, Kim explained that an error occurred in calculating the fair value of new businesses—which have no impact at all on profit and loss—based on the profits of the core business.
Kim said, "Even if you apply a complete-vehicle business rerating perspective, there are blind spots. Most of Hyundai Motor's pretax profit comes from the auto business, but when you add finance, other, and equity-method gains and losses, they account for about 40% of last year's pretax profit," adding, "In other words, even if a valuation premium for the complete-vehicle business itself, not robots, is reasonable, ultimately there is a structural limit to applying a single price-earnings ratio (PER) multiple."
First, it saw events remaining that could continue to drive Hyundai Motor's share price higher going forward. These include SoftBank's exercise of a put option on Boston Dynamics equity in June–July, a third party's equity investment in Boston Dynamics' rights issue to be carried out in the second quarter this year, and expanded visibility on future production volume through Boston Dynamics' non-captive orders.
However, Yuanta Securities Korea said it holds a neutral stance on unconditional optimism about Boston Dynamics' initial public offering (IPO) valuation.
Kim said, "Even applying a single PER valuation multiple, it is already higher than global competitors, and the sources of earnings are also an additional dilutive factor for valuation," adding, "We believe a conservative approach is needed to a share price rise accompanied by a decline in the core business."