Table of Contents
Executive summary ........................................................................... 4
Sector consolidation and sales recovery to drive growth .........................................................4
Valuation and EPS forecasts............................................................. 5
Further upside despite stellar ytd performance ........................................................................5
Strong correlation between share prices of the three companies ............................................5
Valuation and earnings forecasts ..............................................................................................6
Global valuation matrix..............................................................................................................9
Korean automakers – emerging stronger from the downturn .... 10
Recent stellar share price performance supported by improvement in fundamentals............10
Korean automakers gaining market share across major markets............................................10
Are these market share gains sustainable?.............................................................................13
Favorable currency picking up the slack against low utilization ..............................................15
New model launches to accelerate growth ............................................................................16
Continued R&D spending; no longer a laggard in key technologies .......................................17
Industry leading profitability ....................................................................................................18
Growing brand value and geographical footprint ........................ 19
Superb marketing, rising brand awareness.............................................................................19
Aggressive marketing, strong improvement in industry brand surveys ..................................19
Franchise building by investing in dealerships ........................................................................20
Well-timed capacity expansion to capitalize on demand.........................................................21
Geographically diversified sales mix mitigates demand and currency risk..............................22
Key presence in growing segments – the small car market....................................................23
We expect better economies of scale on platform integration...............................................24
Positive changes on the labor front ........................................................................................25
Industry demand showing signs of bottoming out...................... 26
Worst of cyclical downturn behind us, incrementally positive on demand .............................26
Government interventions to support demand .......................................................................26
Demand outlook for the major markets ..................................................................................27
Earnings outlook.............................................................................. 32
Key assumptions and earnings drivers....................................................................................32
Earnings estimates vs. consensus..........................................................................................35
Currency sensitivity.................................................................................................................35
Falling raw material prices helping..........................................................................................36
Investment risks .............................................................................. 38
Key risks to our positive rating................................................................................................38
Hyundai Motor Group shareholding structure.........................................................................39
Hyundai Motor................................................................................. 40
Kia Motors........................................................................................ 57
Hyundai Mobis................................................................................. 72