Hyundai Autoever
The author is an analyst for NH Investment & Securities. He can be reached at dongyang.kim@nhqv.com -- Ed.
Backed by an accelerated digital transformation, mid/long-term growth prospects at Hyundai Autoever’s strategic businesses remain valid. The firm is beefing up: 1) its smart mobility capabilities by merging subsidiaries; and 2) its status as a major HMG affiliate. Hyundai Autoever has set a annual sales target of W5tn for 2027.
Aiming to achieve W5tn in annual sales in 2027
Hyundai Autoever’s 2024 OP is primed to grow 19% y-y to W233.2bn, supported by: 1) its subsidiary’s IT investment execution; 2) cloud infrastructure expansion; 3) a greater market share for vehicle-related sales at subsidiaries and rising demand for advanced navigation systems; and 4) higher vehicle SW application.
Hyundai Autoever presented a 2027 sales target of W5tn (+13% CAGR). The firm plans to achieve its sales target in keeping with: 1) Hyundai Motor Group sales growth; 2) ICT expansion, including next-generation ERP, cloud services, and smart factories; 3) strengthening navigation SW and Mobilgene vehicle SW; and 4) an increase in non-captive clients and discovery of new arenas such as advanced air mobility (AAM).
Adhering to a Buy rating, we raise our TP on Hyundai Autoever from W175,000 to W200,000, reflecting a switch in base year (2023 → 2024) for our TP calculation, upward revisions to our earnings forecasts, and a change in our valuation multiple (EV/EBITDA: 12.0x → 12.7x) made in reflection of peer group share price changes.
2Q23 review: Firm records its highest-ever quarterly OPM
Hyundai Autoever's 2Q23 results significantly topped consensus, with sales of W753.9bn (+20% y-y) and OP of W52.7bn (+83% y-y).
Both the SI division (sales of W240.9bn, +10% y-y) and the ITO division (sales of W347.6bn, +20% y-y) continued to deliver rapid earnings growth, aided by both the establishment of next-generation ERP systems and the expansion of cloud infrastructure in response to solid earnings at HMG’s major affiliates. The vehicle SW division (W165.4bn, +34% y-y) also displayed sound earnings thanks to higher sales of navigation and electric device software following an increase in finished vehicle production. Thanks to a rise in IT contract ASP and a temporary reduction in R&D expense, the company booked its highest quarterly OPM of 7% (+2.4% y-y).