As the global automotive semiconductor shortage has been prolonged longer than expected, expectations for Hyundai Motor and Kia’s 3Q earnings are also lowering slightly.

Hyundai and Kia's 3Q earnings expectations lower due to supply and demand shortage of semiconductors

The second quarter, which was considered a ‘semiconductor barley pass’, showed the potential to record the highest performance ever, but this is due to supply and demand disruptions due to the spread of the new coronavirus infection (COVID-19) delta mutation in Southeast Asia. However, the impact is expected to be limited.

On the 23rd, Yonhap Infomax compiled the forecasts of 17 securities companies that have published reports within the last two months. As a result, the consensus for Hyundai Motor’s operating profit in the third quarter (average forecast) was 1.786.9 trillion won, which is expected to turn black compared to the same period last year.

In the third quarter of last year, it recorded an operating loss of 313.8 billion won reflecting the cost of quality. The sales consensus for the third quarter was 29.30 trillion won, which is expected to increase by 6.27% compared to the same period last year (27,575.8 billion won).

However, this is slightly lower than the average forecast of 20 securities companies that issued reports within three months, with an operating profit of 1.80.3 trillion won and sales of 29.337.9 trillion won.

In the case of Kia, the operating profit consensus of 19 securities companies that have issued reports within the past two months is expected to rise by 603.74% compared to the third quarter of last year (195.2 billion won), which reflects the quality cost at 1.37 trillion won. The sales consensus is 17,722.8 billion won.

However, the average forecasts of the two securities companies that have issued reports within the past month are 1.327.3 trillion won in operating profit and 16.921.6 trillion won in sales, slightly lower than the two-month average. This is because Unisem, a Malaysian semiconductor back-end process company, has entered into a shutdown due to concerns about the spread of Corona 19, raising concerns about disruptions in semiconductor supply and demand.

Hyundai Motor and Kia already suffered production disruptions of 70,000 and 60,000 units, respectively, in the first half of the year due to a supply shortage of semiconductors. Initially, production disruption was expected to be less in the third quarter than in the second quarter, but concerns about the supply and demand for automotive semiconductors have been resurfaced as most automakers rely on Southeast Asia for part of their semiconductor supply chain.

Hyundai Motor halted the operation of its Asan plant for five days in this month alone due to disruptions in the supply and demand of semiconductors for electronic control units (ECUs) for theta engines. In the case of Hyundai, it is estimated that production setbacks occurred by about 10% in August and 20% in September compared to the original plan. Kia is also experiencing setbacks mainly at its highly profitable domestic plants.

Kim Jin-woo, a researcher at Korea Investment & Securities, said, “In the second quarter, inventory sales protected all sales, but in the third quarter, inventory sales cannot be expected, so production disruptions lead to sales disruptions. .

However, some view that the impact of the semiconductor supply disruption from Southeast Asia is limited. Yoo Ji-woong, a researcher at eBest Investment & Securities, said, “This impact will be limited to models produced at the Asan plant such as Hyundai Motor’s Sonata and Grandeur, and most domestic factories of finished cars will start normal operation from October.”

He added, “The concern about supply disruption from 2023 to 2024 is a phenomenon that has emerged while strengthening the outlook for electric vehicle sales.

Park Yeon-joo, a researcher at Mirae Asset Securities, said, “If demand is strong, solid earnings can be sustained despite rising raw material prices or insufficient supply of semiconductors.” We expect relatively solid performance,” he said.

 

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