Why are Hyundai Motor shares boxed in despite record earnings?

Hyundai Motor and Kia's headquarters in Seoul, Jan. 25 / Yonhap

Shares of Hyundai Motor are still locked in a boxed-in range despite record earnings, which analysts attribute to a pessimistic outlook for the global car industry — particularly triggered by falling demand for electric vehicles (EV), they said Monday.

The analysis came in response to the lukewarm stock performance of the nation’s leading carmaker, even after surprising investors last week by achieving a whopping operating profit growth of 54 percent in 2023 from a year earlier.

But Hyundai Motor's share price is moving within a band of around 170,000 won ($127) and 200,000 won, which is not in tandem with its earnings growth, as the figure is still far lower than three years earlier. The carmaker’s stock price has not shown any drastic rallies over the past decade, hitting a decade high of merely around 260,000 won per share in January 2021.

“We cut the carmaker’s target stock price down to 250,000 won per share from an earlier forecast of 290,000 won, taking into consideration the lingering market uncertainty stemming from the outlook for the global car sales slowdown this year,” IBK Investment & Securities analyst Lee Sang-hyun said.

According to data from U.S.-based market tracker Cox Automotive, the new-vehicle inventory there came in at 2.66 million as of Jan. 1 this year, up more than 50 percent from a year earlier. The figure is unlikely to decline rapidly anytime soon due to the overall industry slump amid long-lasting high interest rates.

Tesla, the world’s largest EV manufacturer, also issued a warning over the EV market slump, saying its vehicle sales growth this year may be “notably lower” than last year. This was due to the aftermath of the toughening market competition, as Chinese firms make aggressive inroads into the eco-friendly vehicle market with low-price strategies.

Hyundai Motor has not been exempt from the negative market outlook. Hyundai Motor Group is the second-largest EV player in the U.S., accounting for a 7.9 percent market share. But it remains unclear whether it will be able to continue expanding its EV presence throughout this year in the face of the toughening market competition and macroeconomic uncertainties, according to other analysts.

“A forecast of its earnings momentum slowdown will hinder Hyundai Motor shares from reaching a new high,” Hana Securities analyst Song Seon-jae said. “The carmaker will be negatively affected by the global industrial demand slowdown and escalating competition with its counterparts abroad.”

Hyundai Motor, however, reiterated its position of increasing its investments in EVs and eco-friendly vehicles — such as hybrid cars.

“Even if sales for EVs are on course for a slowdown, we will maintain our plans to sell more than 2 million EVs annually by 2030,” Koo Za-yong, senior vice president and head of investor relations at the carmaker, said in a recent conference call. “If we realize the plan accordingly, our sales for EVs and hybrid cars will account for half of total car sales by the timeline.”