This photo provided by Hyundai Motor Group shows the group’s headquarters in southern Seoul. (Image courtesy of Yonhap)
SEOUL, Jun. 19 (Korea Bizwire) – Hyundai Motor’s share price reached a historic peak on June 18, propelled by the anticipated effects of its Indian subsidiary’s initial public offering (IPO). Kia Motors, which had traded range-bound after its dividend payout following a March high, also surpassed its previous record, with both automakers setting new highs on the same day.
Hyundai’s stock rose 1.62% to close at 283,000 won, after touching an all-time high of 290,000 won intraday, surpassing its previous record set in January 2021. Kia’s shares gained 1.47% to 131,000 won, also reaching a new peak of 133,900 won during the session.
Hyundai announced plans to list a 17.5% stake in its Indian unit through an IPO, which securities firms estimate could raise $3 billion. Lee Jae-il, an analyst at Eugene Investment & Securities, calculated that the IPO could potentially add 10.5 trillion won to Hyundai’s current market capitalization based on the Indian unit’s estimated valuation.
This valuation considers the stake’s equity value, IPO cash proceeds, and the loss of earnings from the Indian unit’s existing operations. Additionally, the buoyant Indian stock market raises the possibility of the unit securing a higher valuation.
Hyundai’s ongoing share buyback program, part of its shareholder return policy, has also contributed to the stock’s momentum. “Hyundai’s recent shareholder return ratio stands at 25%, but a 2 trillion won share repurchase would raise it to 40%,” said Yoon Hyuk-jin, an analyst at SK Securities.
Yoon further noted that if Hyundai were to match the shareholder return levels of Toyota and Honda, its price-to-earnings ratio could reach 8 times, compared to the current forward P/E of 5 times for 2024.
The prospects of using the IPO proceeds for shareholder returns also boosted the share prices of Hyundai’s preferred shares a day earlier, with Hyundai Motor Preferred rising 2.64%, Hyundai Mobis 2nd Preferred up 3.05%, and Hyundai Mobis 3rd Preferred gaining 2.99%.
Foreign investors have actively bought into the automakers, with Kia attracting a net 89.9 billion won in foreign buying on June 17, the highest among KOSPI stocks. Hyundai Motor saw a net 56.6 billion won in foreign inflows.
While Kia had outpaced Hyundai earlier in the year, reaching 128,500 won on March 14 before declining, it has recently rebounded, driven by rising hybrid vehicle sales.
Securities firms project Hyundai Motor to report an 18% year-over-year increase in operating profit to around 4.2 trillion won for the second quarter, aided by strong sales in North America offsetting domestic market weakness.
The appreciating U.S. dollar has also boosted Hyundai’s earnings prospects, further fueling the stock’s rally.
Kevin Lee (kevinlee@koreabizwire.com)
