Hyundai Motor, Kia projected to have kept up solid earnings streak Q1

[Photo by Lee Chung-woo]

South Korea’s largest automaker Hyundai Motor Co. and its sibling Kia Corp. are projected to have kept up solid earnings streak in the first three-month period as they managed to sustain uninterrupted production during global demand recovery despite chip shortage.

According to data compiled by Seoul-based financial data provider Yonhap Infomax on Monday, Hyundai Motor is estimated to have earned 1.46 trillion won ($1.3 billion) in the first quarter ended March 2021, up 69.11 percent from the same period a year earlier. Sales are forecast to have risen 4.85 percent on year to total 26.56 trillion won. The carmaker would have slightly underperformed from a profit of 1.64 trillion won in the fourth quarter before write-down of 386.6 billion won for recall reflection on sales of 29.2 trillion won.

Kia’s operating profit for the same period is projected at 1.09 trillion won, surging 145.94 percent from a year ago. Sales are expected to have added 11.12 percent to 16.19 trillion won. Its performance would slightly pale against seven-year best profit of 1.28 trillion won on sales of 16.91 trillion won.

Hyundai Motor delivered a total of 997,882 vehicles from January to March, up 10.5 percent on year – 185,413 units at home (up 16.6 percent) and 812,469 units overseas (up 9.2 percent).

Kia’s shipments rose 6.1 percent to 688,409 units at home and abroad. Domestic sales were up 11.4 percent to 130,075 units, and overseas sales 5.0 percent to 558,334 units.

In the United States, they sold a combined 144,932 units last month – Hyundai Motor 78,409 units and Kia 66,523 units, record monthly shipments since their advance into the market.

More profitable sport utility vehicles sales more than doubled to 93,019 units, and luxury brand Genesis sales more than tripled to 3,006 units.

The downside risk is a shortage of semiconductors that is already hammering the global automobile industry.

Following the footsteps of Ford, Toyota, Volkswagen and Honda, Hyundai Motor announced last week to unplug its electric vehicle factory in Ulsan for a weeklong April 7-14 and adjust the rollout of its much-hyped all-electric Ioniq 5 due to the chip shortage. Kia will temporarily suspend the operation of its Georgia plant in the U.S. for two days this week.

The suspension won’t likely have big impact on the bottom line for the time being.

“Hyundai Motor’s Ulsan first plant produces average 30,000 units per month, and thus a weeklong shutdown can disturb manufacturing of 7,000-8,000 units, equivalent to a mere 2-3 percent of its total monthly output of 350,000-380,000 units. The loss can be easily offset by an improvement in sales of other models,” said Im Eun-yeong, an analyst at Samsung Securities.

Global automotive demand also is solid, boding well for the companies.

“The fundamental reason of the semiconductor shortage is faster-than-expected recovery of demand for automobiles,” said Kim Jin-woo, an analyst at Korea Investment & Securities, expecting that such strong auto demand would help all automotive brands under output disruption post better-than-expected first-quarter earnings.

Genensis GV80. [Photo by Hyundai Motor Group]

Sales of premium models grew as well, contributing to improvement in profitability.

Hyundai’s luxury marque Genesis sold 14,066 vehicles last month in Korea, breaking the previous record shipments set in June last year. SUV sales also more than doubled in March – Sorento with 8,357 units and Carnival with 9,520 units.

Analysts recently all revised up Hyundai Motor’s stock price target to 313,333 won on average, 34.19 percent higher than the current price. Kia stock also has more room to rise to 117,500 won, up 35.68 percent from the current value.

On Monday, Hyundai Motor shares closed 0.21 percent higher at 234,000 won in Seoul, while Kia ended 1.27 percent lower at 85,500 won.

[ㄏ Maeil Business Newspaper & mk.co.kr, All rights reserved]