[Edaily Reporter Shin Ha-yeon ] On the 30th, IBK Investment & Securities assessed that HyundaiMotor(005380)maintained solid profitability despite slowing demand in the global automotive market and production disruptions, thanks to an improved product mix centered on hybrid vehicles (HEVs). The analysis notes that while major global automakers are experiencing deteriorating profitability, HyundaiMotor’s ability to defend its profits is standing out relatively. The firm maintained its “Buy” rating but lowered the target price by 31% from the previous 670,000 won to 460,000 won.

Lee Hyun-wook, an analyst at IBK Investment & Securities, stated in a report released today, “Despite a short-term slowdown in sales growth, we believe the company’s ability to defend profitability in its core automotive business and the momentum of its new businesses remain valid.”

HyundaiMotor’s third-quarter revenue this year was 45.11 trillion won, down 3.4% year-over-year, but operating profit rose 5.5% to 2.677 trillion won. The operating profit margin stood at 5.9%, up 0.5 percentage points from the same period last year. Operating profit exceeded the market consensus of 2.436 trillion won by 9.9%.

Due to domestic strikes and a reduction in business days, global wholesale sales totaled 921,000 units, down 11.3% year-over-year. The improvement in profitability despite a double-digit decline in sales volume was driven by a shift in the sales mix toward high-value-added models and a reduction in warranty expenses.

In particular, the share of hybrid vehicle sales rose to 18.2%, up 2.7 percentage points from the same period last year. Warranty expenses also decreased by approximately 1.2 trillion won year-over-year due to a decline in the exchange rate at the end of the period, contributing to the improvement in profits. On the other hand, electric vehicle (EV) sales continued to decline year-over-year due to slowing regional demand and intensifying competition.

However, expectations for annual performance have been lowered. Reflecting the slowdown in global demand and production disruptions, HyundaiMotor lowered its global wholesale sales target for this year from the previous 4,158,000 units to 4,000,000 units. The operating profit margin guidance was also revised downward from the previous 6.3–7.3% to 5.5–6.5%.

The analyst noted, “HEV sales remain robust, particularly in North America, and the trend toward an improved product mix is expected to continue in the second half of the year through the launch of major new models and the expansion of the electrified lineup.”

Compared to global automakers, HyundaiMotor’s ability to defend its profitability is considered particularly notable. In the third quarter, operating profit margins in the automotive sector were 2.5% for Mercedes-Benz, 0.7% for Stellantis, -5.6% for Volvo, and -7.8% for Volkswagen.

The report explains that while sales of battery electric vehicles (BEVs) are increasing in the European market, profitability pressures on traditional automakers are mounting due to a combination of aggressive overseas expansion and price competition from Chinese EV manufacturers, as well as a sluggish Chinese market.

The analyst noted, “In this environment, HyundaiMotor stands out relatively for maintaining profitability in the high 5% range through a flexible powertrain strategy centered on hybrid electric vehicles (HEVs) and an improvement in its product mix focused on North America.”

In the medium to long term, the physical artificial intelligence (AI) business was also cited as a growth driver. HyundaiMotor Group is pushing to expand the supply of robotaxis and commercialize Boston Dynamics’ humanoid robot “Atlas.” The report also noted that there is potential demand for more than 25,000 Atlas units within HyundaiMotor Group itself.

IBK Investment & Securities projected HyundaiMotor’s annual revenue for this year at 187.614 trillion won and operating profit at 10.563 trillion won. Operating profit is expected to decrease by 7.9% year-over-year. For next year, the firm forecast revenue of 192.631 trillion won and operating profit of 11.067 trillion won, representing increases of 2.7% and 4.8%, respectively.

The downward revision of the target price reflects adjustments to earnings estimates. IBK Investment & Securities calculated the fair value by applying a target price-to-earnings ratio (PER) of 12.5 times to HyundaiMotor’s projected earnings per share (EPS) of 36,786 won for the next 12 months. This represents a 20% premium over the average PER of established automakers.

The analyst noted, “The trend of improving product mix is expected to continue through the launch of major new models and the expansion of the electrified lineup in the second half of the year,” adding, “In the medium to long term, the Physical AI business—including the expansion of robo-taxi supply and the commercialization of Atlas—is proceeding as planned. Therefore, despite a short-term slowdown in sales growth, the company’s ability to defend profitability in its core automotive business and the momentum of its new businesses remain intact.”