Kia (000270.KS), whose shares have fallen 17% over the past two weeks, is "excessively undervalued in terms of valuation compared with Hyundai Motor (005380.KS)," according to a brokerage analysis.
NH Investment & Securities (005940.KS) maintained its target price of 220,000 won and a "buy" rating on Kia in a research report Friday. Kia's shares closed at 140,600 won in the previous session. The upside potential against the target price is 56.4%.
Kia rose to an intraday high of 212,500 won in late February but subsequently fell sharply, drawing a downward curve over two weeks amid recent high market volatility. The change in the previous day's closing price compared with the close on the 16th of this month was 17.4%.
NH Investment & Securities analyzed that this share-price trend was formed at an excessively low level compared with Kia's earnings outlook. The brokerage expects Kia's second-quarter revenue to reach 32.0835 trillion won and operating profit 2.8079 trillion won, up 9.3% and 1.6% respectively from the same period last year.
Ha Neul, a researcher at NH Investment & Securities, said, "The valuation discount against Hyundai Motor has widened to 48% (a 2021-2023 average of 22%)," adding, "The valuation discount will narrow through an expanded role in the development of new businesses, which is a trigger for the group's share price gains, and through the equity structure of the robotics production entity to be announced going forward."
He explained, "Kia is recording the highest profitability among global automakers," adding, "The expansion of its global vehicle sales share based on solid profitability is positive."
He continued, "In the United States, the Metaplant has begun operations, and local production of the Sportage HEV (hybrid) will start in June," forecasting, "An expansion in sales share and an improvement in profitability will emerge in the U.S., which is growing centered on hybrids."
