One of Top 3 Sellers in the EV Market
The authors are analysts of Shinhan Investment Corp. They can be reached at yjjung86@shinhan.com and ik.jung@shinhan.com, respectively. -- Ed.
Pushing ahead in both combustion engine and electric cars
Hyundai Motor is seeing a strong start to the launch of the all-new Tucson, its biggest-volume model that accounted for 13% of total shipments in 2019. Pre-orders reportedly exceeded 8,000 units within the first 30 minutes, even with the highly-anticipated HEV model yet to be included in the lineup. Meanwhile, the automaker sold 7,474 units of pure EVs worldwide in July, ranking fifth among global brands. Looking at Europe alone, Hyundai Motor came in third at sales of 5,858 units. As fully expected, the company retained its global lead in sales of hydrogen fuel cell vehicles, while initiating exports of its fuel cell systems to Europe.
Re-rating expected on earnings growth and solid market share
Adding to the uptrend in earnings from the success of the new volume model, strong performance in the market for next-generation vehicles is projected to drive improvement in share valuations for Hyundai Motor. We now expect the company to report operating profit of KRW1.1tr (+198.9% YoY) for 3Q20, beating market expectations. Growth should be driven by further ASP hikes in the domestic market and recovery of capacity utilization rates at overseas plants. EV rivals such as iX3 (BMW), 500 la Prima (FCA), and the new Honda e (Honda) are scheduled for release in Europe within 2H20, but we believe Hyundai Motor will maintain its leading edge in segment positioning and product competitiveness. With the company solidifying its standing as one of the top three sellers in the EV market, we expect the re-rating of shares to continue going forward.
Retain BUY and raise target price to KRW220,000
We retain BUY on Hyundai Motor and raise our target price by 13% to
KRW220,000, based on 2021F EPS and a PER of 14.6x (40% premium to the global peer average PER of 10.0x). Our revised-up valuation for Hyundai
Motor places the value of the company's combustion engine business at
KRW43.5tr based on the average PER of global peers, and adds a premium of roughly KRW10tr for its electric car business.