Hyundai Motor Nears $36 Billion Quarterly Sales Milestone as Brokerages Split on Stock Outlook

Brokerages Split on Hyundai Motor Outlook

Revenue set for a record, while operating profit is projected to fall by about 10%

Price targets diverge sharply at 700,000 won and 840,000 won

'Robotics re-rating' versus 'foreign investor exit'

Investors are watching whether Hyundai Motor Co. exceeded 50 trillion won ($36.3 billion) in second-quarter revenue. Excluding semiconductor makers such as Samsung Electronics Co. and SK Hynix Inc., Hyundai would become the first South Korean company to join the 50 trillion-won quarterly revenue club.

Brokerages are split. Some have cut their target prices on concerns about a near-term earnings slowdown, while others have raised them, arguing that new growth drivers such as robotics warrant a higher valuation.

FnGuide, a South Korean financial data provider, puts Hyundai Motor's consensus estimate for second-quarter revenue at 49.0521 trillion won ($35.6 billion), up 1.6% from a year earlier. If the automaker tops 50 trillion won in quarterly revenue, it would mark a 10 trillion-won increase from the 40 trillion-won level it first surpassed in the second quarter of 2023.

Only two South Korean companies, Samsung Electronics and SK Hynix, have ever posted more than 50 trillion won in quarterly sales. If Hyundai Motor joins them, it would be the first non-chip company to do so. That would be especially notable because the auto industry lacks the pronounced cycles seen in semiconductors.

Operating profit, however, is estimated at 3.1377 trillion won ($2.28 billion), down 12.9% from a year earlier. The decline comes despite record U.S. sales, as parts supply disruptions caused by a fire at Daejeon Safety Industrial and higher raw-material costs tied to the U.S.-Iran war weighed on results. Since last year, U.S. tariffs have added pressure, leaving Hyundai Motor with rising sales but shrinking operating profit.

That mix of record revenue and a double-digit drop in operating profit has led to sharply different views on the stock. Kiwoom Securities lowered its target price, saying profit growth will be hard to achieve this year.

Shin Yoon-chul, an analyst at Kiwoom Securities, said accumulated earnings shocks in the first half made it difficult to be confident that Hyundai Motor can grow profit this year. He maintained a buy rating but cut his target price to 700,000 won from 750,000 won.

Kiwoom forecasts second-quarter revenue of 47.2 trillion won ($34.3 billion) and operating profit of 2.83 trillion won ($2.06 billion). It estimates domestic sales at 158,000 vehicles, down 16.4% from a year earlier.

Shin said production disruptions at domestic plants making key sport utility vehicles, including the Santa Fe, hurt sales after the Safety Industrial fire. Production disruptions at Hyundai Mobis Co.'s Chennai Plant 1 after a fire at its India plant have been normalized, he added, but back-to-back supplier fires remained a burden.

The rise in the won-dollar and won-euro exchange rates is another negative factor for Hyundai Motor. At the end of the second quarter, the won stood at 1,549 per dollar and 1,767 per euro, up 30 won and 18 won, respectively, from the previous quarter.

Shin said the revaluation of foreign-currency sales warranty reserves due to the weaker won would weigh on selling and administrative expenses. He estimated the second-quarter impact at 100 billion won to 150 billion won ($72.6 million to $108.9 million). The first-half cumulative cost is estimated at 400 billion won ($290.4 million).

Shin also cited foreign investor selling as a drag on the stock. Foreign ownership, which stood at 35% in January, has now fallen below 25%.

Overseas investors no longer buy into the share-rally narrative sparked earlier this year by physical AI, Shin said. To lure them back, Hyundai Motor needs to restore competitiveness in its core business and raise expectations for earnings per share.

DS Investment & Securities took the opposite view, arguing that the investment case for Hyundai Motor is shifting rapidly from auto earnings to robotics. The firm said Hyundai could be re-rated as a robotics platform company built on industrial-site data, rather than valued solely as an automaker.

Choi Tae-yong, an analyst at DS Investment & Securities, maintained a buy rating and raised his target price to 840,000 won from 740,000 won. Near-term earnings undershot expectations because of production disruptions, he said, but shipment recovery and cost improvements are expected to gain traction in the second half. The value of the robotics business could then emerge as a new valuation driver.

Choi was particularly positive on Hyundai Motor Group's buildup of a data flywheel centered on its Robot Meta-Plant Application Center, or RMAC, through the accumulation of vast amounts of industrial-site data. The physical data collected at manufacturing sites is a core asset for competitiveness in robot foundation models, he said, and creates a barrier to entry that other robotics companies would struggle to match.

"The key to further upside in the stock is ultimately robotics," Choi said. "Starting with RMAC, the business is becoming more sophisticated as the data flywheel begins operating in earnest. Hyundai is also one of the few robotics players able to secure massive amounts of field data."

Choi also viewed Hyundai Motor Group's collaboration with Google positively. If Google smart glasses help the company secure first-person video data, that could strengthen its robot AI training capabilities, he said. That, in turn, would give Hyundai an edge over Chinese robotics companies and support a re-rating of its corporate value.

Choi forecasts Hyundai Motor's full-year revenue at 193.7 trillion won ($140.8 billion) and operating profit at 11.9 trillion won ($8.65 billion), up 4% and 3.7%, respectively, from a year earlier. A favorable exchange-rate environment in the second half, recovery from production disruptions and the pass-through of lower raw-material prices are key to maintaining those estimates, he said.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com