[Alpha Biz= Reporter Kim Minyoung] Kiwoom Securities: "HD Hyundai Construction Equipment Expected to See Earnings Growth in the Second Half of the Year, Positive Impact from End of Russia-Ukraine War on Demand"
On August 6, Kiwoom Securities projected that HD Hyundai Construction Equipment would experience earnings growth in the second half of the year, driven by a rebound in demand due to potential resolution of the Russia-Ukraine conflict. The firm maintained its "Buy" rating and target price of KRW 74,000, with the stock closing at KRW 51,700 on the previous trading day.
Kiwoom Securities expects that the company's performance will improve in the second half of the year due to a rebound in demand influenced by the U.S. interest rate cuts and the normalization of dealer inventories in advanced markets. The end of the Russia-Ukraine conflict is also expected to positively impact demand, particularly through recovery in sales in the Russian market and improved demand in Europe.
Earlier, HD Hyundai Construction Equipment reported a 39.3% decline in operating profit for Q2, down to KRW 58.6 billion, and a 17.4% drop in sales to KRW 853 billion, compared to the same period last year. This underperformance relative to market expectations was attributed to decreased sales due to high interest rates and a strong dollar affecting demand in both advanced and emerging markets.
The decline in demand in Europe and North America was significantly impacted by delays in interest rate cuts. Additionally, the strength of the dollar adversely affected purchasing power in emerging markets like Russia, Turkey, and Latin America.
Conversely, demand remained strong in India and Brazil due to infrastructure investments and new product launches, leading to growth in sales and profits. Despite decreased sales volume, regional mix deterioration, and increased promotional costs, profitability remained satisfactory.
Looking forward, Kiwoom Securities anticipates that the company's performance will improve due to expanded promotional activities in North America and Europe, which have helped normalize dealer inventories. Additionally, the anticipated impact of U.S. interest rate cuts and improved business conditions in the second half of the year are expected to drive growth.
Alphabiz Kim Minyoung (kimmy@alphabiz.co.kr)
