Daishin Securities (003540) said the earnings impact from Hyundai Mobis' (012330) sale of its lamp business will be limited, while the deal should bring in cash and streamline operations. The brokerage lowered its target price to 580,000 won from 690,000 won, however, citing third-quarter operating profit that is likely to fall short of market expectations. It maintained a buy rating.
"The hit to earnings from selling the lamp division will not be large," Kim Gwi-yeon, an analyst at Daishin Securities, said in a report on the 1st. "Securing investment capacity through business streamlining and cash inflows is a positive."
Hyundai Mobis disclosed the previous day that it would split off the lamp division into a wholly owned subsidiary, which holds net assets of 376 billion won. The move follows a memorandum of understanding signed in January with French auto parts maker OP Mobility, giving concrete shape to the transaction. OP Mobility has said the deal is worth 600 billion won. Hyundai Mobis plans to sell its entire stake in the new subsidiary once the split is complete, with the split scheduled for April 1 next year.
Daishin estimated that the lamp division generated about 2.5 trillion won in revenue last year, with the portion being sold accounting for roughly 1 trillion won — a limited share of Hyundai Mobis' total revenue of about 61 trillion won. Given the division's reliance on Hyundai Motor (005380) and Kia (000270) and its focus on supplying smaller vehicle models, its contribution to operating profit was likely modest as well, the brokerage said.
On the share price, Daishin said appraisal rights granted to shareholders who oppose the spin-off should provide a floor. The planned buyback price is 408,394 won per share. Shareholders must meet exercise requirements, however, including notifying the company of their opposition in advance and not voting in favor of the spin-off at the shareholder meeting.
The target price cut reflects lowered earnings estimates and the time needed to reach mass production in the robotics business. Daishin cut its operating profit forecasts for this year and next to 3.72 trillion won and 4.608 trillion won, down 5.3% and 3.6% from its previous estimates. "Earnings are constrained by weak Hyundai Motor sales and the impact of the fire at the India plant," Kim said, adding that profitability in the after-sales segment is also expected to weaken from the previous quarter as the won strengthens.
Daishin pointed to Hyundai Motor Group's U.S. robotics investment plans, initial mass production of actuators for humanoid bodies and progress in developing gripper actuators, which serve as robot hands, as the variables that will drive the stock going forward.
