HL Mando
The author is an analyst for NH Investment & Securities. He can be reached at soohong.cho@nhqv.com -- Ed.
Although cutting our OP forecasts, we remain upbeat toward mid/long-term earnings improvement on HL Mando’s customer diversification, completion of restructuring of conventional parts at domestic plants, and expansion of IDB applications.
Despite short-term concerns...
Although adhering to a Buy rating, we lower our TP on HL Mando from W68,000 to W60,000. While we believe that its mid/long-term profitability improvement trend remains valid, our earnings improvement expectations are being tempered by consideration of China's macro uncertainties. Recent aggressive price cuts by North America EV players will likely be offset by mid/long-term volume growth.
Although trimming down our OP forecasts from the previous marks, we expect mid/long-term top-line growth to sustain on customer diversification and product advancement. In addition, R&D burden should start easing in 2025 once the firm’s development of second-generation integrated dynamic brakes (IDBs) is completed.
Attribute relatively high portion (vs rival parts makers) of Chinese clients to diversification efforts
Chinese car sales have been on a decline since June. High-base effects due to Chinese lockdowns are also in play. Given that the market shock for Chinese automobile demand after the breakout of the pandemic was relatively small compared to that in other markets, and with rapid transition to electrification serving as a buffering factor, recent real estate risks appear to be a stronger source of impact on actual demand.