威廉希尔中文网站 > 金融 > Hyundai Mobis:Buy,Key takeaways from Asia non-deal roadshow
2019-12-24
Hyundai Mobis:Buy,Key takeaways from Asia non-deal roadshow

威廉希尔中文网站 ,Module division: Mobis foresees its module business margin declining further in 2Q17,mainly due to weaker demand in China. The company is sceptical on rapid volumerecovery as its captive OEMs saw their SUV segment market share shrink in 1Q17.

    The company has changed its production schedule to two shifts from three previously(for the Changzhou plant, utilisation rate has remained low at around 40-45% vs. atarget of around 60% in 1Q17), and believes that Korean OEMs will have to eitherincrease incentives or the number of new models in China, in order to boost salesvolumes. However, we note that OEMs’ aggressive promotions could translate intopricing pressure for the company. Mobis expects a mild recovery in 2H with OEMs’ newSUV model launches. Meanwhile, it is planning to increase local sourcing in China tooffset margin deterioration. The Mexico plant is currently loss making, with lowerutilization rates at 50-60% vs. 80% targeted, but Mobis expects break-even from 4Q17.

    A/S division: Mobis explained that its After Sales (A/S) division reported solid results onthe back of: 1) an improved distribution system in the EU; and 2) an increasing supply ofSUV-related parts. We believe the company’s logistics investments will catalyse astructural A/S margin improvement. In fact, the central logistics centre in Belgium, whichbegan operations in 3Q16, has lowered expenses and shortened parts delivery times byserving as a hub to supply A/S parts to regular distribution centres. The system enablesMobis to monitor inventory levels on a real-time basis and transfers surplus stockpilesamong regions; under the integrated system, the parts delivery period could be slashedfrom 13 to 7 days and lower the average age of inventories by 20%. This improvedlogistics system has enhanced its margin by 2-3% in the EU and the company isconfident the A/S division can deliver 23-24% OPM.

    Earnings changes: We forecast A/S OPM will improve structurally on: 1) betterlogistics in the EU, and 2) increased supply of SUV-related parts. We now assume23.3% OPM for the A/S division (vs. 21.5% previously) and raise our 2017-19e OPestimates by 3% to 5%.

    Maintain Buy: While short-term earnings will be exposed to the volatility of Chinaproduction at Korean OEMs, we maintain our Buy rating as we forecast a long-termstructural improvement in earnings, backed by: 1) its A/S business’s earningsstability; 2) an increasing portion of advanced driver-assistance systems (ADAS) andnew energy vehicles; and 3) potential customer diversification in the US and EU.