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Photo = Yonhap news |
[Alpha Biz= Reporter Kim Jisun] With the won-dollar exchange rate recently surpassing 1,450 won, analysts expect that Hyundai Motor and Kia, which have a high proportion of overseas sales, will see a significant boost in operating profits as the exchange rate increases. According to Hana Securities on Wednesday, the operating profit of both companies is projected to rise by 200 to 300 billion won for every 10-won increase in the exchange rate.
Hana Securities stated, "Both Hyundai Motor and Kia are exposed to more than 31% of their global production and over 45% of their revenue in dollars. As such, a rise in the won-dollar exchange rate will positively affect profits." They estimate that Hyundai's operating profit will increase by approximately 280 billion won, and Kia’s by 220 billion won for every 10-won increase in the exchange rate.
The won-dollar exchange rate has risen from 1,320 won in September to 1,456 won as of the 24th, and the average exchange rate for the fourth quarter is expected to be around 1,400 won, which is more than 3% higher than the previous quarter. As a result, Hyundai and Kia are expected to benefit from improved operating profits due to the high exchange rate.
Hana Securities further noted, "This represents a 1.9% and 1.7% change in their estimated operating profits for next year, respectively, with the combined impact being 1.8%. We believe this will lead to an upward revision of Hyundai and Kia’s fourth-quarter and full-year operating profit estimates by 7% and 10%, respectively."
However, the report also pointed out potential risks. A rapid change in the exchange rate could lead to increased warranty provisions related to the final exchange rate, while domestic demand may weaken due to the currency fluctuations. Additionally, the recent 10% rise in the yen-dollar exchange rate in the past three months should be noted. There are also concerns about possible reductions in electric vehicle subsidies in the U.S. next year and the imposition of 10-20% universal tariffs.
Hana Securities adjusted its exchange rate assumptions for next year, raising the average and final exchange rates from 1,340 won and 1,280 won to 1,395 won and 1,360 won, respectively. With these changes, they expect Hyundai and Kia’s combined operating profit for next year to rise by 7%, reaching between 28.1 trillion and 30 trillion won, assuming no adjustments to their sales volume.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
