Hanwha Securities: “Hyundai Motors and Kia, prolonged decline in profitability”… Target↓

Hanwha Investment & Securities [003530] announced on the 10th that the profitability of Hyundai Motors [005380] and Kia [000270] will not be good next year due to sluggish industry conditions and intensifying competition in Europe.

Accordingly, Hyundai Motor Company's target stock price was lowered from 600,000 won to 490,000 won, and Kia's target stock price was lowered from 210,000 won to 180,000 won.

The closing prices of Hyundai Motors and Kia the previous day were 271,500 won and 97,000 won, respectively.

Hanwha Investment & Securities cited the rise in raw material prices this year and the prolonged downward trend of the won/dollar as the reasons for the decline in profitability of the two companies next year. In particular, it is expected that it will be greatly affected by intensified competition in the European market.

Recently, Chinese companies have been expanding their export volume as domestic demand has slumped due to a slowdown in domestic demand. It is analyzed that more than 15% of Chinese companies' export volume is headed to Europe.

Researcher Kim Seong-rae said, “Hyundai Motors will expand production of the IONIQ 3 in Turkey and focus on recovering market share despite the offensive of local Chinese companies,” adding, “However, volume increase and contribution to profitability will be low due to worsening profitability due to intensifying competition.”

Regarding Kia, he predicted, "Europe will focus on defending against the offensive of local Chinese companies in response to the expansion of demand for economical electric vehicles (EVs), centering on the Slovakian plant," and added, "However, despite the expansion of sales centered on new cars, the low profitability of the model will continue due to the intensifying offensive of Chinese local companies in Europe."

It was assessed that the automobile industry will remain sluggish next year.

Researcher Kim said, “After the high growth in 2023, demand for the global automobile industry continues to slow due to uncertainties such as changes in tariffs and subsidy policies.” He added, “Next year’s demand will continue to grow at a low level due to macro uncertainties such as high interest rates and high prices, despite the low base this year.”