ein beitrag
The author is an analyst of NH Investment & Securities. He can be reached at soohong.cho@nhqv.com. -- Ed.
Even after the recent share price rally, HMC shares are still trading at a 2021F P/B of 0.9x, a valuation level that has yet to reflect the firm’s long-term growth potential, in our view. We believe there exists ample upside for its shares, noting an anticipated successful transition of its business structure and improvement in intrinsic value in 2021.
Deserves premium for sustainable long-term growth momentum
Reiterating a Buy rating, we raise our TP on Hyundai Motor Company (HMC) from W240,000 to W330,000. Our TP calculation considers the firm’s future asset value and ROE. We switch the base year for TP calculation to 2023F in order to reflect HMC’s prospects for long-term earnings improvement amid the ongoing upcycle. In addition, we believe HMC deserves a 30% premium considering high market expectations for a successful transition in its business structure. Our new TP equates to a 2021F P/E of 14.5x and P/B of 1.2x.
In spite of the recent share price rally, HMC shares still trade at a 2021E P/E9.1x. While its current share price appears to reflect expectations for long-term ROE improvement following the onset of a new virtuous cycle, we believe that expectations for mid/long-term business structure transformation have yet to be priced in. When anticipated improvement in intrinsic value is considered, it appears that HMC shares still boast ample upside.
Virtuous cycle to accelerate in 2021
In our view, expectations for earnings improvement driven by the global spread of new model effects deserves more attention than concerns towards the strengthening won. In 2021, HMC’s global sales are to expand 13.1% y-y. We forecast that the firm’s 2021 sales and OP will amount to W111tn (+6.9% y-y) and W6tn (+109.6% y-y; OPM of 5.4%), respectively.
This year, major business events for HMC include the global roll-out of new Genesis models (GV70/GV80) and the launch of the Ioniq 5, the first model built on its E-platform. Following the Ioniq 5, HMC is to expand its EV lineup aggressively to 12 models by end-2025, with the related sales target set at 560,000 units. By 2040, the firm aims to achieve full electrification of all models in core markets.