Due to production disruptions at Hyundai Motors and Kia, the burden on Hyundai Mobis' third quarter performance also increased. The supply of modules has decreased due to the suspension of finished car factories, and the cost of parts has increased and the burden of exchange rates has also increased. Securities companies are successively lowering their performance forecasts and target stock prices. On the other hand, the highly profitable after-sales service (A/S) parts business is expected to continue its relatively solid trend.
On the 13th, Kiwoom Securities lowered the target stock price of Hyundai Mobis (012330) by 14.7% from 750,000 won to 640,000 won. Hanwha Investment & Securities also lowered its target stock price from 810,000 won to 800,000 won on this day. Previously, Hana Securities and Daishin Securities each proposed 580,000 won, and Shinhan Investment & Securities lowered it to 710,000 won.
The operating profit forecast for the third quarter is around 900 billion won. Kiwoom Securities predicted sales of 15.9 trillion won and operating profit of 902.8 billion won. Hanwha Investment & Securities presented sales of 15.754 trillion won and operating profit of 920.6 billion won. The estimated operating profits of Hana Securities and Daishin Securities are 896.4 billion won and 890.3 billion won, respectively.
Aftermath of strike between Hyundai Motor Company and Kia Motors… Module sales fall to 7 trillion won
Production disruptions at Hyundai Motors and Kia's domestic plants had a direct impact on Hyundai Mobis' module business. Sales in the third quarter are also expected to decline as the supply of chassis and driver seat modules required for vehicle assembly decreases.
Shin Yun-cheol, a researcher at Kiwoom Securities, said, “Due to the suspension of production at domestic factories due to the strike at Hyundai Motor Company and Kia Motors, module assembly sales in the third quarter are expected to fall below KRW 7 trillion for the first time this year.”
Despite the decline in finished vehicle production, the module assembly business is expected to maintain a small surplus. The securities market believes that the expansion of supply sources to customers other than Hyundai Motor Group will absorb some of the impact of decreased sales.
Along with the decline in sales, the cost burden also increased. Hanwha Investment & Securities cited the rise in prices of major components such as semiconductors and printed circuit boards (PCBs) and the strong won as factors behind the decline in profitability in the third quarter. As production volume has decreased and parts procurement costs have risen, it is not easy to improve profits in the manufacturing sector.
Even if the normalization of production by Hyundai Motor Company and Kia Motors leads to a recovery in module supply, the burden on profitability due to rising component costs is expected to remain for the time being.
A/S operating profit ratio 26%... Closed lamp business and expanded into robots
Despite setbacks in finished vehicle production, the A/S business is expected to maintain high profitability. Since it is based on maintenance and repair demands for vehicles already sold, the impact of new vehicle production is relatively small.
Hana Securities estimated Hyundai Mobis' third quarter A/S sales at approximately 3.4 trillion won and operating profit ratio at 26.0%. While the module assembly business is being hit by production disruptions, the A/S division is playing a role in supporting overall operating profit.
However, there are limits to the high profitability of the after-sales service business alone to offset the slowdown in growth in the manufacturing sector. This is the background for Hyundai Mobis to expand investment into new fields such as electronics and robots while adjusting the structure of its existing automobile parts business.
On the 30th of last month, Hyundai Mobis signed a main contract with French auto parts company OP Mobility to sell its lamp business worth about 600 billion won. The plan is to split the business unit in April next year and complete the sale through related procedures.
The sale of the lamp business is in line with the move to reorganize the business around core parts with high profitability and growth potential. Hyundai Mobis is focusing on electrification and electronics while fostering robot parts as a new business.
A representative field is joint actuators to be applied to Boston Dynamics’ robots. Actuators are components that control the movement of robot joints using motors and reducers, and are an area where Hyundai Mobis can utilize the drive and control technology it has accumulated in the automobile parts business.
Securities companies are suggesting the possibility of supplying actuator samples within the year. Although additional orders are needed for actual mass production and sales expansion, Hyundai Mobis is expanding its business to reduce its dependence on existing finished car production through the sale of its lamp business and the development of robot parts.
