Hyundai Wia
The author is an analyst for NH Investment & Securities. He can be reached at soohong.cho@nhqv.com -- Ed.
A change in business structure to electrification is expected at Hyundai Wia’s auto parts division on orders for thermal management parts. Elsewhere, having completed restructuring, the machinery division should see a full-scale strengthening in top- and bottom-line growth from 2024 on greater orders for defense and RnA.
Mid/long-term new business expectations yet to be reflected; opportunity in play
We maintain a Buy rating and TP of W90,000 on Hyundai Wia. We expect robust order momentum this year, which should confirm the mid/long-term growth potential of the firm’s two major divisions (auto parts/machinery). However, such expectations have yet to be significantly reflected in the share price. If progress materializes as anticipated, both top-line growth and strengthened profitability are in the cards, with new business earnings to kick off in earnest at the machinery division from 2024 and the auto parts division from 2025. We believe that a mid/long-term bargain buy & hold strategy will be effective.
Thermal management test site completed; restructuring effects to be seen in earnest at machinery division from 2024
Hyundai Wia’s auto parts division is seeking a change in business structure away from ICE parts to electrification. Recently, an R&D test site has been completed for the supply of integrated thermal management systems (ITMSs). The goal is to supply for next-generation EV platforms, which are scheduled for mass production from 2025, and related bidding is set to take place in 2H23. If orders flow in as planned, new EV-related sales of approximately W1tn are expected by 2027.
At the machinery division, which has faced losses since 2017, years of restructuring have delivered improvements, and growth potential is ramping up on the recent jump in new orders from the defense and robotics & autonomous (RnA) domains. We foresee a significant rise in new orders at the machinery division to approximately W1.5tn in 2023. By 2024, sales at the machinery division should recover to W1tn (vs average of W760bn over past four years), with restructuring to lead to improved profitability.