[Edaily Reporter Kim Hyung-il ] HEUNGKUK METALTECH CO.,LTD. projected that Hyundai Motor ( KIA CORPORATION(000270)) will continue to face profitability pressures in the short term due to expanding sales of battery electric vehicles (BEVs). While maintaining its “Buy (BUY)” investment rating, the firm lowered its target price from 220,000 won to 180,000 won to reflect downward revisions to short-term earnings estimates.

On the 13th, Ma Geon-woo, an analyst at HEUNGKUK METALTECH CO.,LTD., estimated that KIA CORPORATION’s third-quarter revenue would reach 31.4 trillion won, a 9.4% increase year-over-year, while operating profit would rise 51.7% to 2.2 trillion won. However, compared to the previous quarter, revenue is projected to decline by 5% and operating profit by 15.6%. The operating profit margin is expected to be 7.1%.

Although strikes continued within the group, KIA CORPORATION’s strikes were limited to partial walkouts, allowing the company to maintain its sales growth momentum—with wholesale sales (excluding China) rising 8.7% year-over-year to 831,000 units. However, the analyst noted that the strong won likely acted as a partial constraint on revenue growth.

In terms of profitability, analysts anticipated that rising raw material prices and the expanding share of relatively low-margin electric vehicle (EV) sales would act as burdens, even with valuation gains on provision liabilities resulting from the sharp drop in the exchange rate at the end of the period. Consequently, they revised their previous operating profit margin estimate downward by 0.7 percentage points.

In particular, the firm highlighted that KIA CORPORATION has lowered the selling price of its entry-level electric vehicles to compete with low-cost electric vehicles in the European market, which is driving EV sales growth. Given that incentives are also believed to remain at high levels, the firm concluded that pressure on profitability is unavoidable for the time being.

Hybrid vehicles (HEVs) were identified as the key to safeguarding profitability. The analysis suggests that, since the company cannot afford to abandon the EV market in the long term, it will be crucial to determine how effectively it can offset the profitability pressures resulting from expanding EV sales through the sale of high-margin powertrains.

Researcher Ma expects profitability pressures to gradually ease from the fourth quarter through next year. He forecasts that the expansion of high-margin hybrid vehicle sales—driven by the mass production of the Sportage Hybrid at HyundaiMotor Group’s MetaPlant America (HMGMA), increased production of the Telluride in the U.S., and the introduction of a hybrid version of the all-new Seltos (FMC)—will have a positive impact.

He also noted that for electric vehicles, one must consider the potential for reduced fixed costs per unit as production volumes increase. While a short-term erosion of profitability due to intensifying price competition is inevitable, he explained that achieving economies of scale through expanded market share could lead to improved profitability in the medium to long term.

However, Analyst Ma gave a positive assessment of KIA CORPORATION’s competitiveness, noting that the company has maintained sales growth even amid an unfavorable business environment characterized by concerns over a global demand slowdown due to rising interest rates and high raw material prices. He also cited the dividend yield of around 6% based on the current stock price as a factor supporting the stock’s downside.