Stock picks: Buy Hyundai Motor, Sell Hansae Fashion Worldwide
Buy: Hyundai Motor
The first-quarter result from Hyundai Motor is exciting that the profit from its factories far exceeded market expectations, said KB Investment & Securities.
The combined profit from five factories in the U.S., India, Czech, Turkey and Russia has increased to some 550 billion won from 150 billion won a year ago. Capital gains from its subsidiaries also jumped, meaning that the whole Hyundai Automotive Group is improving all together, the report said.
The stock prices of Hyundai Automotive Group firms have grown very fast this year. In April alone it jumped 24 percent. But KB believes that the Korea’s largest car company is still undervalued compared to its Japanese competitors. The target price is 280,000 won.
Korea District Heating Corp.(KDHC) is the only utility company that both the sell side (brokerage firms) and buy side (fund management firms) agree to be a good buy while the sector is shunned by most investors these days, says Korea Investment & Securities.
The firm provides region-wide heating in many cities, which is often cheaper than individual heating by buildings. Because of inflation worries, most utility firms are under a tight price monitoring by the government, but the KDHC is excluded from the state price control. So they can, and will, reflect the rising crude oil price into their retail heating price, the report says.
Year-on-year sales increased 26.1 percent in the first quarter, but its profit was less than expected because there was a time lag between the cost rise and the price rise, the report says. Lack of liquidity of its shares in the stock market is another concern for potential investors.
Sell: Hansae Fashion Worldwide
Woori Investment & Securities removed Hansae Fashion Worldwide from its recommendation list.
Though the trading company’s fundamentals look strong, Woori said that the institutional and foreign investors are starting to cash out after Hansae’s stock price soared since last month.
Hansae exports textile and has subsidiaries around the world including Vietnam, Indonesia, Guatemala and Nicaragua. In 2008 it opened a new branch in New York.
Before the removal of Hansae from its list, Woori expected the sales of Hansae to grow 16 percent compared to last year’s $800 million. It also said that the stabilization of the price of raw cottons would help boost its revenues.