汇丰银行-韩国-汽车行业-韩国汽车业：更多的结构性问题-20170909-hsbc-korea autos more structural issues ahead

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1、9September2017KoreaAutosEQUITIESAUTOSMorestructuralissuesaheadKoreaStockshavefallen19-20%fromtheirpeakin2017andwePaulChoi*AnalystexaminewhetherthenegativesarepricedinTheHongkongandShanghaiBankingCorporationLimited,SeoulSecuritiesBranchDespiteattractivevaluation,weexpectmorestructur

2、alpaulchoi@kr.hsbc.com+82237068758headwindsfromChina,labourcostsandnewproductsHanminKim*AssociateMaintainHoldonHMCandKia;TPstoKRW139k(KRW142k)TheHongkongandShanghaiBankingCorporationLimited,SeoulSecuritiesBranchandKRW36k(KRW38k),onlowerearningsexpectationshanmin.kim@kr.hsbc.com+82237068

3、763Istheworstbehindus?:HyundaiandKiashareshavefallen19-20%fromtheir*Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andispeakthisyearduetoweakChinasales;ongoinglabourissuesincludingordinarynotregistered/qualifiedpursuanttoFINRAregulationswage;andweakeningproductcompetitiveness.Themark

4、etseemskeentofindoutifallthenegativesarepricedinassharesofferrelativelyattractivevaluations.WeexpectmorestructuralheadwindsfromChina–supplydisruption,disputewithlocalpartnerandpotentiallylowerpricingstrategy;weakeningproductcyclewithdelayedpowertrainupgrades;andthecourtrulingonordinarywa

5、gesuit.1)China:TherecentsuspensionofHMC’sChinaplantswouldleadtoincreasedsourcingfromlocalpartsmakersforcostcutting.Ifsaleskeepfalling,KoreanautomakerswillhavenochoicebuttoacceptJVpartners’demandstochangetheirsourcingstrategyandstrengthenpricecompetitivenessoftheirproducts,inourview.2)Pro

6、ductcycleandcompetitiveness:WestillbelieveHMC’skeysuccesswasdueto‘valueformoney’positioninginthemarket(lowerpricedvehiclewithrelativelybetterperformanceamongmassbrands)butwethinkitwouldtakesometimeforthemtointroducecompetitivenewmodelswithattractivepricings.ThehighernumberofnewSUVmodelsi

7、n2017-2018edoesnotdramaticallyimproveitssalesvolume,inourview,givenlackofpowertrainupgradesdespiteincreasedR&Dspending.3)Labourissues:TherecentcourtrulingonordinarywageshouldputmorepressureonprofitabilitygivenplantsinKoreahavebeenthemostlucrativefactories(mainlyduetohighe