[Edaily Reporter Shin Ha-yeon] On the 16th, Yuanta Securities downgraded its investment rating on #Hyundai Motor from “Buy” to “Hold,” stating that the recent sharp rise in its stock price is based more on expectations for its humanoid business centered on Boston Dynamics (BD) than on its core automotive business. However, the firm raised its target price from 600,000 won to 690,000 won to reflect Boston Dynamics’ enterprise value.

Kim Yong-min, an analyst at Yuanta Securities, analyzed, "The company’s stock price rise this year is not based on a revaluation of existing automotive-related new businesses, but rather on expectations for the growth of the global humanoid market driven by Boston Dynamics," adding, "Even when compared to competitors within the industry, its stock price trend is completely different from that of the finished vehicle sector."

He further pointed out, “There is a miscalculation occurring where the fair value of new businesses—which have no impact on profit and loss—is being calculated based on core business profits,” noting, “Even if a valuation premium specific to the core automotive business (rather than robotics) is justified, there are structural limitations to applying a single price-to-earnings (P/E) ratio multiple.”

Yuanta Securities also cited the fact that, as of this year, the financial, other, and equity method income segments account for approximately 40% of Hyundai Motor’s pre-tax profit as a factor weighing on its valuation. The firm explained that since the PER is an indicator reflecting the sustainability and growth potential of currently generated profits, there are limits to directly reflecting the value of the robotics business—which has yet to make a substantial profit contribution—in the core business’s earnings.

However, the assessment is that there are still variables that could drive further stock price gains in the future. Analyst Kim noted noted, “Key triggers could include the exercise of SoftBank’s put option on its Boston Dynamics stake in June or July, the attraction of third-party investment in the rights offering scheduled for the second half of next year, and an expansion of orders from non-affiliated companies,” but added, “We maintain a neutral stance on unconditional optimism regarding the valuation of Boston Dynamics’ initial public offering (IPO).”

The target price calculation reflected the value of the robotics business. Yuanta Securities revised its target P/E ratio for the automotive business segment to 15x—the same as that of Chinese EV maker BYD—from its previous SOTP (sum-of-the-parts) method. It then assessed Boston Dynamics’ fair enterprise value at 50 trillion won and applied a 50% discount rate based on the holding company’s ownership stake.

Analyst Kim stated, “While we have raised the target price to reflect the value of Boston Dynamics and the re-rating of the core business, we believe a conservative approach is necessary regarding the current stock price rise, which is accompanied by a decline in core business earnings.”