The author is an analyst of NH Investment & Securities. He can be reached at soohong.cho@nhqv.com. — Ed.
Despite macro uncertainties, HMC has presented an aggressive business plan based on its confidence in its product quality improvement. The company’s 2023 business plan looks reliable, and as its plan is implemented, the firm should shed share price discounts.
Achievable business plan; OP to exceed W10tn in 2023
We maintain our Buy rating and TP of W250,000 on Hyundai Motor Company (HMC). Improved product competitiveness and brand awareness is reflected in the firm’s increased global market share, and the company boasts mid/long-term growth potential thanks to its strengthened position in the EV market, following the successful launch of its EV exclusive platform (E-GMP).
HMC targets 2023 global sales (wholesale) of 4.32mn units (+9.5% y-y) and an OPM of 6.5~7.5%. Although there are macro uncertainties, the business plan looks reliable given the company’s improved product quality and solid backorders (in line with semiconductor supply-demand issues and accumulated deferred demand in the electrification transition process).
The firm’s year-end DPS is estimated at W6,000. Including an interim dividend of W1,000/share, full-year dividend should rise 40% y-y to W7,000 (dividend yield of 4% based on the Jan 26 closing price). We also positively note HMC’s plan to operate flexible shareholder return policy in the future.
4Q22 review: Fundamentals better feared
HMC booked consolidated 4Q22 sales of W38.5tn (+24.2% y-y) and OP of W3,359.2bn (+119.6% y-y; OPM of 8.7%), with OP beating consensus. Pre-tax profit came to W2,738.6bn (+85.8% y-y), which is lower than expected due to the drop in the dollar/won rate at yearend and a large number of non-recurring expenses (including impairment losses due to sluggish operations in China and Russia). Noteworthy was an improvement in product mix at the auto division.
OP at the finance division plunged 43.1% y-y to W308bn (OPM of 7.1%). However, we note that since last quarter, the firm has preemptively reflected costs. In 2023, the division’s OPM should stabilize at the high single-digit level. Meanwhile, OP at the other division, which includes the defense business, soared 146.8% y-y to W190bn (OPM of 7.4%).
