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Hyundai Mobis faces dim Q2 outlook: report

May 4, 2017 - 15:47 By Korea Herald
A dim second-quarter outlook for Hyundai Mobis, South Korea’s biggest auto parts maker, has cast a cloud over the company due to a lack of sales momentum for Hyundai Motor and Kia Motors to boost their performance, industry experts said Thursday.

Analysts, including Esther Yim at Samsung Securities, lowered Hyundai Mobis’ expected second-quarter performance. 
 
(Hyundai Mobis)

Yim projected that the auto parts supplier would post sales of 8.9 trillion won ($7.9 billion) from April to June, down 8.8 percent year-on-year. Its operating profit was expected to plummet 20 percent to 626.8 billion won.

Hyundai and Kia’s performance is an essential factor for Hyundai Mobis, as the two automakers account for some 70 percent of the auto parts maker’s sales.

Hyundai Mobis supplies modules for various Hyundai and Kia models, including Hyundai’s LF Sonata sedan and Hyundai’s luxury lineup Grandeur IG sedan.

“Hyundai and Kia Motors’ sluggish sales in China is a result of intensifying competition there and their falling product competitiveness,” Yim said.

“It is difficult to expect sales to bounce back up on eased political risks.”

Despite enhanced profitability of Hyundai Mobis’ after-service business, chances of the company showing improved profit in the coming months remain unlikely due to weak performance in the module business, according to Moon Yong-kwon, an analyst KTB Investment & Securities.

Hyundai Mobis is largely divided into module business and after-service business.

Sales posted by its module sector totaled 7.5 trillion won, down 2.2 on-year in the first quarter, which was the lowest since 2011, company data showed.

The rising inventory of Hyundai and Kia Motors is also accountable for Hyundai Mobis’ sluggish module business, as they will continue downsizing production, Moon said.

That means less modules for Hyundai Mobis to sell.

The new vehicle inventory of Kia Motors in the US reached 4.9 months of supply as of March, which means the automaker holds the inventory for an average 4.9 months before selling it.

According to Moon, conditions in China and the US will continue to affect Hyundai and Kia, and ultimately push down Hyundai Mobis’ performance. By Kim Bo-gyung (lisakim425@heraldcorp.com)