Hyundai Motor Group shares rise on higher vehicle sales, dividend payout plans

2023.03.13 12:23:02 | 2023.03.13 12:24:01

Hyundai Motor Group headquarters in Seoul [Photo by Park Hyung-ki]이미지 확대

Hyundai Motor Group headquarters in Seoul [Photo by Park Hyung-ki]

Shares of Hyundai Motor Group units have gained over recent days, driven by higher-than-expected growth in car sales, lower raw material prices and its plan for bigger dividend payouts and proposed buybacks.

Kia Corp. shares have risen 31.53 percent this year, as of Friday, according to Korea Exchange on Sunday. Over the same period, Hyundai Motor Co. saw a 15.89 percent rise in its shares, the group’s auto parts maker Hyundai Mobis Co. gained 7.98 percent and the group’s steel unit Hyundai Steel Co. climbed 11.93 percent. The group’s logistics unit Hyundai Glovis Co., though, saw a 5.75 percent fall as container shipping rates fell due to a global economic downturn.

The overall upward trend among the group’s shares is mostly driven by foreign buyers. Among the top stocks that were net purchased by foreign investors, Hyundai Motor was fourth with net purchases of 513 billion won ($401.4 million), Kia was eighth with 183.9 billion won and Hyundai Mobis was 15th with 120.6 billion won.

Units of Hyundai Motor Group gained mainly on expectations of higher earnings this year following the higher-than-expected sales at the beginning of 2023. Auto sales had been initially projected to be sluggish this year due to global interest rate hikes and the economic downturn. However, Hyundai Motor and Kia together sold 122,111 units in the U.S. in February, the most for that month and a year-on-year rise of 16.2 percent. In the same month, Toyota Motor Corp. and Honda Motor Co. each posted a drop of 2.4 percent and 1.4 percent in U.S. sales.

The group also saw growth in global sales for February. Hyundai Motor globally sold 328,000 vehicles, a 7.3 percent year-on-year increase. Kia sold 254,000 units that month, a 14.7 percent surge. The increase in global sales was due to stable production after securing sufficient supply of semiconductors for automobiles.

“The big three Japanese automakers?Toyota, Nissan Motor Co. and Honda?accounted for 27 percent of the U.S. market in February, seeing a 2 percentage point fall year-on-year, as the lack of chips slowed their production,” said one analyst at DB Financial Investment Co. “Hyundai Motor Group successfully targeted that gap in the market.”

The decline in prices of iron ore and coal is expected to help the group’s automakers report better earnings this year.

Hyundai Mobis building in Seoul [Photo by Yonhap]이미지 확대

Hyundai Mobis building in Seoul [Photo by Yonhap]

Local financial data tracker FnGuide said Hyundai Motor is projected to post 10.32 trillion won in operating profit this year, up 2.16 percent from last year’s record 9.8 trillion won. Kia is also projected to top 8.8 trillion won operating profit, a rise of 11.68 percent from last year’s 7.2 trillion won.

Hyundai Mobis is likely to pass the break-even point in its electrification business as Hyundai Motor and Kia increase their production of electric vehicles.

“The company’s sales revenues are rapidly growing and its operating profit margin is projected to hit the 4 percent range, with logistics costs normalizing,” a Samsung Securities Co. analyst projected.

The group’s steel arm, Hyundai Steel, is forecast to see higher demand for steel products on higher vehicle sales and China’s stimulus plan. “Hyundai Steel will probably sell more plates for automobiles as Hyundai Motor and Kia are likely to increase their production,” said an analyst at Yuanta Securities Co.

Along with the industry-wide factors, the group’s policies on shareholder returns have positively affected shares. During an earnings call at the end of January, Hyundai Motor announced that it will offer its shareholders a total of 7,000 won a share in dividend payout for 2022. The dividend yield is a record 3.8 percent.

Kia offered a dividend of 3,500 won per share and Hyundai Mobis 4,000 won. Hyundai Glovis, whose largest shareholder is Executive Chairman Euisun Chung, announced the company’s mid- and long-term dividend plan to give 5 percent to 50 percent increase in payout for the next three years. For year 2022, the company announced a payout of 5,700 won per share, a 50 percent increase from a year before.

Hyundai Motor last month canceled 315.5 billion won worth of its own shares and Kia pledged to buy back as much as 500 billion won worth of its shares in the next five years and retire half of that.

Still, Chung faces challenges of increasing his control of the group and ease the group’s complex shareholding structure, financial industry insiders predicted. Hyundai Motor Group is the only conglomerate among the top 10 that has cross shareholding structure. Higher dividend payouts could help Chung use that fund to secure shares in Hyundai Mobis.

By Kim Je-gwan and Chang Iou-chung

[ⓒ Pulse by Maeil Business Newspaper &, All rights reserved]