Hyundai Motor Summary Report
Core Content
This report provides an analysis of Hyundai Motor (HMC) and its affiliates, focusing on financial performance, valuation, and strategic changes. It highlights the company's recent performance, the impact of market conditions, and the potential for recovery due to internal restructuring and improved sales.
Main Points
- Current Valuation: HMC's shares are trading near the liquidation value of KRW125,000, which is 0.47x P/B (2017E), similar to its valuation during the global financial crisis.
- Target Price: The analyst's target price for HMC is KRW190,000, implying a potential upside of 20.6% from the current price of KRW157,500.
- Performance Trends: HMC has experienced a decline in sales and profits over the past four years, but it has seen a rebound in operating profit for 2017 and 2018, with expectations of continued growth.
- Group Restructuring: The Hyundai Motor Group is undergoing a significant restructuring, focusing on improving the value chain in China and enhancing governance.
- Affiliate Performance:
- Kia: Has struggled with sales in key markets and is expected to see a slow recovery.
- Hyundai Mobis: Expected to benefit from HMC's recovery and increased demand for eco-friendly and aftermarket parts.
- Market Conditions: Sales in non-China emerging markets are improving due to macroeconomic factors, while China remains a challenge due to trade policies and competition.
- Valuation Comparison: HMC is undervalued compared to global peers and domestic stocks with low P/B ratios.
Key Information
Market Overview
- Current Price: KRW157,500
- Target Price: KRW190,000 (20.6% upside)
- Market Cap: KRW34.7t/USD30.8b
- Shares (float): 220,276,479 (65.8%)
- 52-week High/Low: KRW170,000/KRW129,000
- Avg Daily Trading Value (60-day): KRW90.3b/USD80.1m
One-Year Performance
| Period |
Hyundai Motor (%) |
Vs Kospi (%pts) |
| 1M |
10.5 |
2.2 |
| 6M |
19.8 |
3.5 |
| 12M |
13.3 |
-2.3 |
Key Changes
| Metric |
New (2017E) |
Old (2017E) |
Diff (%) |
| Recommend. |
BUY |
BUY |
- |
| Target Price |
190,000 |
190,000 |
0.0% |
| 2017E EPS |
18,465 |
18,674 |
-1.1% |
| 2018E EPS |
21,353 |
21,282 |
0.3% |
Market Cap Breakdown
| Component |
HMC (KRWb) |
Kia (KRWb) |
Mobis (KRWb) |
| Equity Value & Net Cash |
27,723 |
8,184 |
14,308 |
| Value of Stake in Major Affiliate |
4,909 |
4,049 |
7,234 |
| Financial Subsidiaries |
1,691 |
792 |
193 |
| Treasury Shares |
2,089 |
158 |
660 |
| Other Affiliates |
4,634 |
2,553 |
1,034 |
| Net Cash |
14,400 |
631 |
5,188 |
Liquidation Value
| Component |
HMC (KRWb) |
Kia (KRWb) |
Mobis (KRWb) |
| Net Cash |
14,400 |
0 |
4,652 |
| Equity Holdings |
4,904 |
4,636 |
7,250 |
| Land Holdings |
11,788 |
4,913 |
3,580 |
| After Service Division |
- |
- |
7,418 |
| Total |
31,092 |
9,549 |
22,900 |
| Liquidation Share Price |
125,000 |
24,000 |
242,000 |
Sales and Forecasts
| Market |
2016 (KRWb) |
2017E (KRWb) |
2018E (KRWb) |
| Global (Wholesale) |
93,649 |
98,117 |
102,274 |
| Net Profit (Adj) |
5,720 |
5,554 |
6,417 |
| EPS (Adj) |
18,938 |
18,465 |
21,353 |
| Operating Profit |
5,194 |
5,824 |
6,784 |
Operating Profit by Division (2017E)
| Division |
2017 (KRWb) |
2016 (KRWb) |
Change (%) |
| Auto |
4,651 |
3,916 |
+735 |
| Korea |
1,856 |
1,517 |
+339 |
| US |
133 |
(133) |
0 |
| Europe |
789 |
688 |
+101 |
| EMs (ex China) |
2,140 |
1,844 |
+296 |
| Finance |
603 |
703 |
-100 |
| Other |
570 |
575 |
-5 |
| Consolidated Operating Profit |
5,824 |
5,194 |
+630 |
Earnings and Profitability
| Metric |
2016 (%) |
2017E (%) |
2018E (%) |
| Gross Profit Margin |
19.0 |
19.2 |
19.8 |
| Operating Profit Margin |
6.0 |
6.3 |
6.0 |
| Net Profit Margin |
9.7 |
6.9 |
7.4 |
Valuation Comparison
| Company |
P/B (2017E) |
ROE (2017E) |
EV/EBITDA (2017E) |
| HMC |
0.6 |
7.6 |
9.6 |
| Kia |
0.6 |
5.5 |
8.0 |
| Mobis |
1.36 |
36.7 |
7.0 |
Fair Value Estimates
- Fair Share Price (2017E): KRW180,000
- Fair Share Price (2018E): KRW200,000
- Reasoning: Based on improved operating performance and the potential for governance overhaul, the fair value reflects a more accurate valuation of the company's underlying assets.
Conclusion
The report suggests that HMC is currently undervalued and is poised for a rebound due to its improved operating performance, strategic restructuring, and the potential for governance changes. The analyst recommends aggressive accumulation at current levels, as the stock is expected to break out of its range-bound movement and gain momentum from the group's realignment and improved financials.
