20170531-三星证券-To_break_out_of_valuation_trap_11页_1mb

报告摘要

Hyundai Motor (005380) Summary

Core Content

Hyundai Motor (HMC) is undergoing significant changes in its product strategy and business structure to recover from a five-year earnings slump. The company aims to break out of a two-year valuation trap and lead a sector turnaround in 2H 2017.

Main Points

Earnings Recovery: HMC is expected to show a clear earnings recovery in 2H 2017, with net profit projected to rise by 25.2% y-y.
Product Strategy: The company has adopted a new strategy to enhance competitiveness in performance, fuel economy, price, and design. This includes hiring top talent from premium European brands to lead changes in design and performance.
SUV and Premium Lineup Expansion: HMC plans to expand its SUV lineup from three models in 2016 to eight by 2020, and its Genesis premium lineup from two to six by 2020. This includes the launch of the Kona B-segment SUV and the G70 mid-sized luxury sedan.
Group Restructuring: The Hyundai Motor Group (HMG) is likely to restructure due to the deteriorating earnings of its affiliates and the need to adjust its value chain in China, the world's largest auto market. The restructuring is also driven by external pressures to improve corporate governance and minority shareholder rights.
Valuation Outlook: The stock is expected to break out of its valuation trap, with a target price of KRW190,000, representing a 16.5% upside from the current price of KRW163,000.

Key Information

Financial Highlights (2016-2019E)

Metric	2016	2017E	2018E	2019E
Revenue (KRWb)	93,649	97,669	103,880	110,122
Net Profit (adj) (KRWb)	5,720	5,550	6,450	6,805
EPS (adj) (KRW)	18,938	18,452	21,462	22,647
EPS (adj) Growth (% y-y)	(15.8)	(2.6)	16.3	5.5
EBITDA Margin (%)	9.1	9.6	10.1	9.9
ROE (%)	8.4	7.6	8.3	8.2
P/E (adj) (x)	8.7	8.9	7.6	7.2
P/B (x)	0.7	0.6	0.6	0.5
EV/EBITDA (x)	11.0	9.8	8.4	7.8
Dividend Yield (%)	2.4	3.0	3.4	4.3

Key Changes

Metric	New	Old	Diff
Recommendation	BUY	BUY	-
Target Price	190,000	190,000	0.0%
2017E EPS	18,452	18,465	-0.1%
2018E EPS	21,462	21,353	+0.5%

SAMSUNG vs THE STREET

Metric	Samsung	Street
No of estimates	24	-
Target Price	184,833	-
Recommendation	3.9	-

HMC Rankings

Model	Performance	Fuel Efficiency	Price	Design
LF Sonata	B	B	B	B
YF Sonata	C	A	A	A

Potential Holding Company Structure

All New HC Market Cap: KRW28,636b
Chung Family Stake: 28.38% (MK: 17.20%, ES: 11.18%)
Total Stake (including subsidiaries and treasury): 45.01%
Value of Stake in Major Affiliate (HMC): KRW5,390b
Value of Stake in Kia: KRW4,616b
Value of Stake in Mobis: KRW7,417b
Target Market Capitalization (HMC): KRW63,157b
Upside (%): 48.5%

Strategic Initiatives

New Product Strategy: HMC is enhancing its product competitiveness through design and performance improvements.
SUV Expansion: Launching new models like Kona and expanding to eight SUVs by 2020.
Premium Lineup Growth: Expanding the Genesis brand to six models by 2020, including the G70 and new SUVs.

Market Outlook

SUV Market Growth: The global SUV market is expected to nearly double in size from 13m to 30m vehicles by 2020.
B-segment SUV Growth: The B-segment SUV market has grown 6.7x over the past four years, with a CAGR of 12.2%.
Operating Profit Growth: Expected to rise KRW800b y-y in 2H, offsetting a KRW100b y-y drop in equity-method gains from China.

Governance and Restructuring

External Pressure: HMG is under pressure to improve transparency and corporate governance, especially due to the new president's focus on minority shareholder rights.
Internal Needs: The group needs to restructure to address the financial struggles of its affiliates and adapt to industry trends like EVs and autonomous vehicles.