20170902-三星证券-Leading_green_car_parts_player_12页_695kb

Hyundai Mobis Summary

Core Content

Hyundai Mobis is a leading supplier of green car parts, particularly for fuel cell electric vehicles (FCEVs), and is a key component of the Hyundai Motor Group (HMG) supply chain. The company is positioned to benefit from the growing demand for eco-friendly automotive technologies, especially as HMG expands its electric vehicle (EV) lineup and explores partnerships with non-group affiliates.

Main Points

• Green Car Parts:

  • Hyundai Mobis is a major supplier of green car parts, which account for 25-30% of FCEV manufacturing costs.
  • The company's green car parts unit is expected to become profitable in 2018, driven by increased sales of EV parts.
  • Green car parts sales are projected to grow from KRW620b in 2016 to KRW3t in 2020, with a CAGR of 39.2%.
  • The company is the only global manufacturer of all four core EV parts (traction motor, inverter, converter, and battery system assembly).

• Market Position:

  • Mobis is the exclusive supplier for HMG's green cars, with ASP (Average Selling Price) ranging from KRW3.5m to 9m per vehicle.
  • The per-vehicle ASP for battery modules is expected to double in 2018 with the introduction of long-range EVs.

• Strategic Shifts:

  • If HMG ends exclusive relationships, Mobis could expand its market to non-group affiliates, which would boost its sales and profitability.
  • HMG plans to increase EV shipments from 18 models in 2016 to 31 models in 2020, and Mobis is expected to supply parts for these models.
  • As part of the shift, Mobis may spin off its driving systems business to focus on core EV parts.

• SUV Expansion:

  • HMG and Kia are expanding their SUV lineups, which is expected to significantly boost Mobis's sales.
  • The B-segment SUVs Kona and Stonic are expected to contribute KRW5t and KRW300b to Mobis's 2018 sales and operating profit, respectively.
  • Parts used in SUVs have 15% higher ASPs than those in passenger vehicles.

• Financial Performance:

  • The target price for Hyundai Mobis is KRW300,000, with a 19.5% upside from the current price of KRW251,000.
  • Free cash flow (FCF) has increased to KRW2t as of 1H17, driven by outsourcing of most operations and low tangible asset investments.
  • Operating profit is expected to stabilize from KRW400b-500b in 2019, with aftermarket and green car parts expected to offset declining Chinese operations.

• Dividend Yield:

  • The dividend yield is expected to rise from 1.4% in 2016 to 2.6% in 2019, with a payout ratio of 10.9% in 2017 and 18.9% in 2018.

• Key Financial Metrics:

  • EPS (Earnings Per Share) is expected to grow from KRW26,771 in 2017 to KRW31,434 in 2018, and KRW33,117 in 2019.
  • P/E (Price-to-Earnings) is projected to decrease from 9.4 in 2017 to 7.6 in 2019, indicating potential undervaluation.
  • EV/EBITDA is expected to drop from 5.4 in 2017 to 4.1 in 2019, further supporting its valuation.

• Operating Profit by Division:

  • The aftermarket parts and green car parts units are expected to contribute significantly to operating profit.
  • Module business has shown consistent performance, with a CAGR of 2% from 2015 to 2020.

• Investment and Growth:

  • The company is investing in R&D and facilities for core EV parts, which should support its growth in 2020.
  • Green car parts are expected to account for 26.35% of total sales in 2020, up from 3.95% in 2016.

Key Information

• Target Price: KRW300,000 (19.5% upside from current price).
• EPS Growth: Expected to grow by 17.4% in 2018 and 5.4% in 2019.
• Free Cash Flow: Increased to KRW2t in 1H17, which should support R&D and investment.
• Market Cap: KRW24.4t/USD21.8b.
• Shares (float): 97,343,863 (67.1%).
• 52-Week High/Low: KRW288,000/KRW215,000.
• Green Car Parts Sales (2020): Expected to reach KRW3t, with a CAGR of 39.2%.
• EV Shipments (2020): HMG and Kia plan to expand EV lineup to 31 models, with 600,000 units expected to be shipped.
• SUV Growth: SUV demand is projected to grow 12.8% CAGR from 13m to 30m units by 2020.
• Dividend Yield: Expected to rise to 2.6% in 2019.
• Payout Ratio: Expected to increase to 18.9% in 2018.
• FCF Contribution to Dividends: Expected to reach 54.5% in 2017.

Summary

Hyundai Mobis is well-positioned to benefit from the growing demand for green car parts and the expansion of EV and SUV lineups by HMG and Kia. The company's exclusive supplier status and low tangible asset investment have contributed to strong FCF and the potential to spin off its driving systems business. With a target price of KRW300,000, the stock is seen as undervalued, and the company is expected to turn profitable in 2018. The financial outlook includes significant EPS growth and rising dividend yields, supported by the expansion of the EV market and the company's strategic focus on core green technologies.