DS Investment Securities said on the 8th that Hyundai AutoEver's second-quarter results would miss consensus because unit price talks were delayed, but that profit momentum would recover in the second half and its role in group Robotics would become visible. It kept its "buy" (BUY) rating and raised the target price to 730,000 won from 530,000 won. The previous session's closing price was 481,500 won.
DS Investment Securities estimated Hyundai AutoEver's second-quarter sales on a consolidation basis at 1.162 trillion won, up 11.6% from a year earlier, and operating profit at 63 billion won, down 23.1%, and said it would miss market expectations (operating profit consensus 80 billion won).
Researcher Choi Tae-yong at DS Investment Securities explained that the main reason for the slowdown was the impact of ITO (IT outsourcing) unit price negotiations being pushed back to the third quarter.
However, as 20 billion won of sales deferred from the first quarter is recognized normally, the top-line growth in the enterprise IT (Enterprise IT) area, including SI (systems integration), was analyzed to be solid.
Automotive software (SW) also increased from the previous quarter, but the improvement is expected to be limited due to last year's high base and the burden of upfront research and development (R&D). Selling, general and administrative expenses to respond to new businesses, such as lease depreciation due to the end of remote work and fees paid for cloud use, were also expected to act as a burden for the time being.
From the second half of this year, a full-fledged rebound in results appears likely.
Researcher Choi said, "This year Hyundai AutoEver's annual sales will reach 4.821 trillion won, up 13.4% from a year earlier, and operating profit will rise 6.7% to 273 billion won," adding, "In the third quarter, the retroactive portion of the ITO unit price increase not reflected in the first half will be recognized at once, leading to a sharp profit rebound."
Choi added, "In the automotive SW area, profitability will gradually improve as mass production of next-generation navigation begins," and "with the transition to next-generation ERP and the benefit of cloud migration, enterprise IT will establish itself as a new growth pillar."
In the fourth quarter, when sales traditionally concentrate, the unit price increase effect will overlap, and the company is projected to post its biggest results of the year.
As a long-term growth momentum, its unrivaled role within Hyundai Motor Group's Robotics business was cited. Choi assessed that Hyundai AutoEver has secured a key role in the control platform (ROP) and data pipeline (RDP) areas.
Choi said, "Among global listed companies, Hyundai AutoEver is the only player that does not manufacture robots directly yet handles control and data SW, while also holding a powerful manufacturing captive (internal group market)," and predicted, "If completion of Robotics America at the end of next year and the start of the Saemangeum data center platform project are confirmed, long-term premium value will turn into visible earnings growth."