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| Hyundai Motor, Kia Corp. headquarters in Seoul / Courtesy of Hyundai Motor Group |
By Kim Hyun-bin
Hyundai Motor will likely see its 2022 operating profit reach 10 trillion won ($7.7 billion) for the first time in its history, despite a range of downside risks, such as the resurgence of COVID-19 and supply chain disruptions this year, according to industry analysts, Tuesday.
Securities companies had initially expected an operating profit of around 8 trillion won for the company but are now raising their forecasts. Despite the supply and demand shortage of automotive semiconductors and concerns about an economic downturn growing in major markets such as the U.S, and Europe, there is a prevailing view that solid new car demand will back earnings in the second half of the year.
According to FnGuide, a financial information company, the consensus for this year's annual operating profit of Hyundai Motor expected by securities companies was on average 10,144.7 billion won as of Sunday.
This is an increase of 51.9 percent compared to last year. The market consensus for Hyundai Motor has been steadily rising since the beginning of the year. As the company announced better-than-expected performance results in the second quarter of the year, the operating profit forecast increased significantly from 8.5 trillion won to 10 trillion won in one month.
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"Hyundai Motor recorded an 'earnings surprise' in the second quarter even in the face of continuous negative factors," an industry official said.
The outlook for Kia to achieve record-high earnings this year is also favorable. Kia's annual operating profit is expected to rise 56.1 percent from last year to 7.9 trillion won. As the market forecast of 6.7 trillion won has risen by nearly 20 percent in just one month, some experts anticipate an annual operating profit of 8 trillion won. The combined forecast operating profit of the two companies is approaching an all-time high of 18 trillion won.
In the second quarter, Hyundai Motor's sales in Europe and North America (wholesale basis) increased by 2.9 percent and 6.6 percent, respectively, compared to the same period last year. Sales of EVs are expanding and sports utility vehicles (SUVs) account for more than half of sales.
In the second half of the year, there are concerns that earnings growth may be dampened by the economic downturn in major markets. However, the auto industry does not expect the impact of the economic recession to be significant as the shipment backlog has been prolonged for a long time.
"Hyundai Motor has high domestic and overseas stand-by demand of 640,000 units in Korea, 140,000 in Europe, and the exposure to emerging markets is expected to recover demand relatively quickly," Song Sung-jae, an analyst at Hana Securities said. "It is expected that the market share will be expanded through the gradual expansion of production."
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