On Thursday, Citi updated its stance on Hyundai Motor Company (OTC:HYMLF), raising the price target on the automaker's shares. The new target is set at KRW290,000, up from the previous KRW250,000, while the firm continues to recommend a Buy rating on the stock.
The adjustment reflects Citi's analysis that Hyundai Motor (OTC:HYMTF) is trading at a significant discount compared to its international counterparts, despite showing promising financial metrics. The analyst pointed out that Hyundai's shares are currently valued at a 34% discount on a price-to-earnings (P/E) basis and a 35% discount on a price-to-book (P/B) basis.
This contrasts with the past five-year average where Hyundai's P/E ratio typically showed a 31% premium and its P/B ratio a 45% discount relative to overseas industry peers.
Citi's optimism is further bolstered by projections that Hyundai Motor will achieve a 1.3 percentage point higher operating profit margin (OPM) in the years 2024-25, a more significant profitability gap compared to the 0.2 percentage point higher margin in the 2019-23 period.
Additionally, the forecasted return on equity (ROE) for Hyundai is only 1.9 percentage points lower than that of its peers for the same future period, an improvement from the 6.6 percentage points lower ROE observed in the past.
The firm also anticipates that Hyundai Motor will generate 67% of the operating profit (OP) average of its overseas peers during 2024-25, which marks an increase from 60% in the 2019-23 timeframe. This expected growth in operating profit contribution is seen as a key factor in the narrowing of the valuation gap between Hyundai and its competitors.
In summary, Citi's revised price target for Hyundai Motor reflects a positive outlook on the company's financial performance and a predicted reduction in the valuation disparity with its global peers. The firm maintains its Buy rating, signaling confidence in Hyundai's potential for stock performance improvement.
InvestingPro Insights
In light of Citi's updated stance on Hyundai Motor Company, incorporating real-time data and insights from InvestingPro can provide a broader perspective on the automaker's financial health and market position. According to recent data, Hyundai Motor Company (HYMTF) boasts a solid market capitalization of $39.53 billion and is trading at an attractive P/E ratio of 4.94, which is further adjusted to 4.78 for the last twelve months as of Q4 2023. This low earnings multiple may signal an undervaluation relative to the company's earnings potential.
InvestingPro Tips suggest that Hyundai is a prominent player in the Automobiles industry, with a strong return over the last three months, evidenced by a 32.3% price total return in that period. Additionally, the company has shown resilience and commitment to shareholders by maintaining dividend payments for 32 consecutive years. Analysts are optimistic, predicting profitability for this year, a sentiment supported by the company's profitable performance over the last twelve months.
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