We believe investors should brace for a strong synchronised demand
recovery in 2011, not in 2010. Prospective European demand contraction
and US demand expansion in 2010 are likely to offset one another, but a
strong synchronised global recovery is more likely from 2011.
■
Structural support for further share gains is more likely after platform
integration plans are completed in 2012. We like management’s renewed
commitment to platform integration completion by 2012, which is critical for
further improving the current market share gain momentum over the next
three-five years, but this will have minimal real impact in 2009 and 2010
■
We have raised our EPS forecast for Kia, HMC and Mobis, though the
positive impact should already be priced in at current levels. Based on
a strong 1H09 and change in industry demand outlook, we have raised our
EPS forecasts for Kia from a very low base, which largely led to a rise in our
EPS forecasts for HMC. We have raised Hyundai Mobis’ EPS based on
increased stake in HMC and lower than previously assumed SG&A burdens.
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We are downgrading our auto sector weighting to UNDERWEIGHT from
Marketweight. Despite our forecast upgrade, we believe that the strong
share price performance of the group sufficiently prices in our forecast
upgrades. We continue to like Mobis from a relative stance vis-à-vis final
assemblers, but note that our new target price of W164,000 represents 16%
potential upside from current levels. Our new target prices of W80,000 for
HMC and W13,600 for Kia represent potential downside of 26% and 21% ,
respectively.