HMG Seeking First Mover Advantage
The author is an analyst of NH Investment & Securities. He can be reached at soohong.cho@nhqv.com. -- Ed.
In 2021, uptrends in global auto shares will likely hinge upon the ability of automakers to respond to changing market conditions. We believe that HMG will successfully transform its business structure, and we expect valuation re-rating on the confirmation of the firm’s ability to achieve sustainable long-term growth.
HMG seeks first mover advantage
In response to the paradigm shift in the automotive industry, Hyundai Motor Group (HMG) is seeking to transform from a manufacturer to a mobility service provider. The group hopes to secure first mover advantage in the mobility sector through its Open Innovation initiative and the strengthening of its future technology/business competitiveness.
In the field of clean mobility, HMG is responding to global market changes by introducing an xEV exclusive platform (E-GMP) and launching the hydrogen fuel cell system brand HTWO (hydrogen+humanity). The firm plans to develop and commercialize a fully autonomous(Level 4/5) driving platform by establishing Motional, an autonomous driving JV with Aptiv. Through the acquisition of Boston Dynamics, robotics technology will be applied to various mobility fields such as autonomous driving and urban air mobility (UAM) in the future. Backed by such efforts, HMG hopes to secure early leadership in the mobility sector.
Investment strategy: Increase confidence in long-term sustainable growth
The possibility and range of cooperation with Apple is still unknown. However, only a few firms, such as Volkswagen, Toyota, GM, and HMG, have the scale and competitiveness to partner with such a big tech company. Regardless of whether actual cooperation is achieved, this issue presents an opportunity for HMG, which seeks to boost its technology/business competitiveness, to strengthen its position as a leading global player.
Earnings momentum was the main driver behind the auto industry rally in early 2010. In the current cycle, valuation re-rating will likely be led by the securing of long-term sustainable growth through successful transition into a new business structure. With this in mind, we expect HMG company share prices to rise above past peaks. We maintain Buy ratings and raise our TPs for Hyundai Motor Company (HMC), Kia Motors, and Hyundai Mobis. We suggest Mobis, which has the strongest potential for business expansion and top-line growth, as our sector top pick.