H-Story

– In Q1, Hyundai Corporation Delivered Strong Performances in the Sectors of Steel and Auto Parts While It’s Highly Likely to Produce LNG Again

– Higher Growth in Various Areas Compared to the Previous Year Leads to a Forecast of Recording the Biggest Quarterly Earnings in Its History

– Operating Income from Steel is Projected to Jump Almost Twofold from the Previous Quarter

 

 
 

Hyundai Corporation posted the highest earnings in its history last year and is expected to sustain its growth momentum in the first quarter of this year fueled by significant growth in steel and auto parts.
 

According to the Financial Supervisory Service’s electronic disclosure dated April 26, Hyundai Corporation (HC) recorded its highest-ever performance last year with a turnover of KRW 6.1269 trillion and an operating profit of KRW 66.8 billion. This year, it is also forecast to achieve stronger earnings than last year. Local securities firms are also expecting HC to continue to report high earnings.

 

In the first quarter of this year, it is projected to continue to grow externally in almost every sector, posting its highest-ever quarterly income.

 

According to Hana Securities, HC’s sales and operating income for the first quarter are projected to climb by 38.8% and 63.6% YoY, respectively, to KRW 1.8 trillion and KRW 23.8 billion. Daishin Securities also expects HC’s turnover and operating profit for Q1 to rise by 33.4% and 62.6% YoY, respectively, to KRW 1.7052 trillion and KRW 23.6 billion.

 

Heungkuk Securities forecasts that HC’s sales and operating income for Q1 will jump by 33.9% and 56.1% YoY, respectively, to KRW 1.7 trillion and KRW 22.9 billion.

 

Such results are deemed to be significantly fueled by strong earnings in steel, auto components, and petrochemicals. Heungkuk Securities analyst Park Jong-ryeol forecast, “On the back of high earnings in steel, auto components, and petrochemicals, HC will also deliver strong performances in the other spheres.”

 

As the chip supply issue, which was observed until last year, has been resolved to a certain degree, HC’s sales in automobiles are projected to significantly expand.

 

Hana Securities analyst Yoo Jae-seon said, “The rise in sales is mainly attributed to the growth in auto components. Because the chip supply chain has been normalized since late last year, HC’s sales have consistently grown. New orders from Central and South America, the Middle East, and the CIS are expected to enable HC to continuously post strong earnings.”

 

“The settlement of the semiconductor supply issue has led to a higher demand in Central and South America, the Middle East, and the CIS, leading sales for auto components to jump to more than KRW 500 billion. The turnover in auto components for the same period of last year was only estimated at KRW 143.7 billion. However, it has since risen sharply for four consecutive quarters,” Daishin Securities researcher Lee Tae-hwan mentioned.

 

The recovery of the steel market and the mega quake in Türkiye played a role in increasing earnings from the steel sector. Researcher Lee said, “The profitability of the steel sector has significantly improved due to the high expectation of China’s reopening leading to a rise in steel prices in global markets, as well as because of the steel supply issue attributed to European steelmakers’ decision to cut steel production and the earthquake in Türkiye. In the steel sector, HC’s operating income is forecast to climb approximately twofold from the previous quarter.”

 

The income rate for petrochemicals is also expected to be maintained in a stable way due to a higher demand recorded last year. Researcher Lee stressed, “The profitability of petrochemicals has been maintained stably despite lower average oil prices.”

 

European steel prices for the second quarter are also projected to be higher than the average for the first quarter. According to industry sources, following the news of oil production cuts, global oil prices are expected to jump, leading HC’s income growth momentum to be maintained continuously.

 

Iran and Saudi Arabia have recently agreed to normalize relations seven years after severing diplomatic ties. Also, amid higher expectations of the end of the civil war in Yemen, LNG production in Yemen may be resumed in the future. These circumstances are forecast to have positive effects on equity method earnings.

 

Hi Investment and Securities analyst Lee Sang-heon pointed out, “The income rate of the steel sector for this year is projected to slow down, but sales for auto components are forecast to swell consistently due to the normalization of vehicle production. As global oil prices are expected to surge for a while, HC’s profitability is likely to be maintained continuously to a certain degree.”

 
 

EBN
April 26, 2023