[Edaily Reporter Kim Kyung-eun ] On the 6th, NH INVESTMENT & SECURITIES lowered its target price for HyundaiMotor(005380)by 12.9% from 620,000 won to 540,000 won, reflecting a slowdown in global wholesale sales and intensifying price competition. The firm maintained its “Buy” rating.

Ha Neul, an analyst at NH INVESTMENT & SECURITIES, stated in a report released that day, “We have reflected downward revisions to medium- to long-term earnings estimates due to a slowdown in global wholesale sales and intensifying price competition.”

The method for calculating the target price was also revised. The company changed its peer group from leading Chinese software-defined vehicle (SDV) manufacturers to Japanese automakers such as Toyota and Honda. This adjustment took into account the fact that HyundaiMotor is maintaining relatively solid profitability through expanded sales of hybrid vehicles (HEVs).

Analyst Ha explained, “In addition to the core business’s ability to defend profits driven by expanded HEV sales, the company possesses medium- to long-term growth options in new businesses such as robotics,” adding, “Taking into account the relative competitiveness of the core business and the value of these new business options, we applied a 20% premium compared to the average of Japanese peers.”

NH INVESTMENT & SECURITIES lowered its revenue forecast for HyundaiMotor this year by 2.4%, from 188.476 trillion won to 184.041 trillion won. The operating profit forecast was lowered by 8.5% from 11.201 trillion won to 10.253 trillion won, and earnings per share (EPS) was reduced by 9.1% from 50,498 won to 45,880 won.

The firm also projected that third-quarter earnings would fall short of market expectations. Revenue is expected to decline 9.6% year-over-year to 42.2232 trillion won, while operating profit is forecast to drop 5.3% to 2.4028 trillion won. This is approximately 20% below the market consensus estimate of 3.009 trillion won for operating profit.

Production disruptions caused by labor union strikes and rising cost pressures are expected to weigh on earnings. The strikes halted operations at some factories, resulting in a production shortfall of approximately 55,000 units, while the number of business days also decreased due to the holiday season. Additionally, the fact that rising raw material prices from the first half of the year have begun to be reflected in manufacturing costs is expected to put pressure on profitability.

The firm expects earnings to bottom out in the third quarter and rebound in the fourth quarter. Fourth-quarter revenue is projected at 46.664 trillion won, with operating profit at 2.484 trillion won.

Analyst Ha stated, “In the fourth quarter, earnings are expected to rebound due to a recovery in wholesale sales following the normalization of production and the launch of new models,” adding, “The launch of the Ioniq 3 in Europe, along with the domestic Grandeur HEV, the new Avante, and the facelifted Santa Fe, is expected to contribute to an improvement in the sales mix.” He added, “The strength of the earnings recovery may vary depending on whether the volume lost due to production disruptions leads to deferred sales, as well as trends in incentives and raw material costs.”