South Korea’s two biggest carmakers are falling behind the wider equities rally as a stronger won, repeated earnings misses and mounting margin pressure prompt brokers to cut price targets.
South Korea’s booming stock market has left Hyundai Motor and Kia behind, as the country’s two largest automakers face renewed pressure from a stronger won, softer earnings and repeated cuts to price targets. The latest slide in the currency has sharpened concerns that the sector’s profit recovery will stay subdued even as broader equities rally.
On the Korea Exchange, Hyundai Motor slipped 0.16% to 309,500 won and Kia fell 1.69% to 110,500 won in the latest session, even as the Kospi surged more than 2% intraday. The disconnect highlights how investors are treating the carmakers less as market leaders and more as cyclical stocks exposed to foreign-exchange swings and uneven operating performance.
The recent share-price damage has been severe. Hyundai has fallen 41.3% from its April 20 closing level of 527,000 won to the latest close, while Kia is down 29.8% from 157,400 won over the same period. Measured against their recent peaks, the losses are even larger, with Hyundai down 58.7% and Kia off 38.4%, underscoring how quickly sentiment has deteriorated.
The won’s decline has become a central issue. The currency recently strengthened to its lowest level against the dollar in about two years, a move that can erode the value of overseas revenue when converted back into won and squeeze margins at exporters with heavy foreign sales exposure. For automakers, that pressure is landing at the same time as higher raw-material and logistics costs continue to weigh on profitability.
Earnings have done little to restore confidence. Hyundai has missed market consensus for operating profit in three straight quarters, while Kia has also fallen short in each of the past three reporting periods. BNK Investment & Securities expects Hyundai’s third-quarter operating profit to come in below market estimates and has cut its target price, while also trimming Kia’s valuation. Other brokers have made similar moves. Hana Securities and other firms cited weaker-than-expected third-quarter profit, the stronger won and margin pressure from electric vehicle discounts and tougher competition.
Still, analysts have not turned uniformly negative. BNK Investment & Securities said Hyundai may regain momentum from the fourth quarter as new models reach showrooms, while Kia could remain comparatively attractive because of its strong profitability in key US models and the benefits of lower costs. Other recent reports have pointed to the same tension: weak near-term margins, but hopes that a broader rebound, new product launches and local production gains could improve earnings later.
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