SEOUL, KOREA - We maintain BUY and raise our TP from W110,000 to W135,000 at 10x 12MF PE, a 10% discount to the parts sector’s average target. We lift our target PE from 9x to 10x given the recovering investor confidence and firming fundamentals. We also up our 12MF EPS by 13.3% in light of ongoing better-than-forecast sales growth at its major customers.
- While China’s passenger car sales jumped 14.7% YoY to 5.68mn in 4M13, Hyundai and Kia’s combined China sales soared 35.1% YoY and Shanghai GM posted bigger growth at 16.8% YoY. Hyundai and Kia’s fast outrunning will continue due to the effect of Hyundai and Kia’s no. 3 China plants.
- Kia’s no. 3 China plant (300,000) will start commercial production in Feb 2014 and Hyundai will expand capacity at the no. 3 China plant from 300,000 to 450,000 by end-2013. As such, their combined China capacity would rise from 1.33mn in 2013 to 1.93mn in 2015.
*Source: Korea Investment & Securities Co.
