Hyundai revs up shares in Korean EV parts makers

South Korea's electric vehicle components market is heating up as top automaker Hyundai Motor Group accelerates its transformation into an EV manufacturer as it reportedly stops new internal combustion engine development. Hyundai’s decision will boost shares in Korean EV component developers, which have been gridlocked by the global automotive semiconductor shortage, industry watchers said.

The Korea Exchange (KRX) Autos Index closed at 2210.17 on Dec. 24. Up 3.18%, the car index made the biggest jump of all major industries' indices on the day. The KRX Autos Index has declined nearly 13% during the second half of this year. 

Investors, expecting Hyundai’s EV business expansion will be faster than market speculation, flocked into the EV component stock market on Friday. The stock price of Hyundai Mobis Co., Hyundai Motor Group’s car parts affiliate, rose 2.53% to 263,000 won ($221.4). Shares of Hyundai Wia Corp., the group’s other affiliate, rose 8.62% to 83,200 won. Mando Corp.'s share price rose 7.38% to 62,600 won while thermal management system provider Hanon System’s stock price rose 6.06% to 14,000 won.

Smaller companies saw a bigger jump in their stock prices – shares of DI Corp. increased 29.88% to close at their daily ceiling of 5,390 won. Shares of Woosu AMS and Kyung Chang Industrial Co. soared 22.28% to 4,995 won and 15.47% to 3,545 won, respectively.

Hyundai Motor Group recently increased its aim of selling 1 million electric cars by 2025 to a new goal of 1.7 million by 2026. Industry watchers expect this will boost the price-earnings ratios (PERs) of Korean EV parts manufacturers.

LOCAL SUPPLIERS TO GLOBAL BRANDS

The carmaker group’s decision is expected to drive the reevaluation of car parts makers' stocks. Hyundai Mobis’ electrification business is rapidly growing, recording 5 trillion won in annual sales this year and prospected to be over 9 trillion won next year. Experts say Hyundai Mobis’ 12-month forward PER, which has fallen to early 8 times, will rebound thanks to its electrification business.

Hanon System, supplying thermal management systems to global automakers such as Volkswagen, General Motors (GM) and Tesla, manufactures as many as 2 million compressors a year, a key component in the air conditioning systems of cars. The compressor production capacity will be over 4.4 million in 2025, Sang-hyun Lee, an analyst at IBK Investment & Securities Co. of Korea, said in a report.

Mando, a major Korean car equipment manufacturer providing components to GM, Cadillac, Ford and others, is focusing on autonomous driving system development. It has supplied a highway driving assistance system to Hyundai Motor Group. In an investor briefing presentation held in early December, the manufacturer said EV components will make up more than 40% of its sales by 2025.

DI Corp. is supplying Hyundai Motor Group and Tesla with reduction gear components for electric cars. The manufacturer saw its cumulative operating profit reach 23.8 billion won by the third quarter of this year.

Write to Yoon-sang Koh at kys@hankyung.com
Jihyun Kim edited this article.