Hyundai Motor Company Pitch

Transcription

1 Hyundai Motor Company Pitch

2

3 Investment Thesis

4 What you re buying 150,000)

5 Summary of Investment Thesis

6 Company Overview

7 Introduction: Company Snapshot Recommendation BUY 3 Year Price v MSCI World *All figures applicable to common, P/E of preferred s = 4x Current Price 150,000 Price Target (5 years) Price Target (10 years) 390,000 (+160%) 600,000 (+300%) Downside (5 years) 180,000 (+20%) Downside (10 years) 250,000 (+67%) Market Cap. 39.5T 52wk range 120, ,000 P/E (2014) 6.2x* Div. Yield 2.6% Analyst Consensus Overweight, 1-Year PT of 195,000

8 Business Overview

9 HMC sales breakdown by geography

10 Global auto penetration rates (per 1,000 population) Vehicle penetration cycle in developing economies Domestic brands losing share Pipeline (HMC ONLY ) H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 Korea i40 Saloon Equus F/L Grand Santa Fe Avante F/L Sonata Grandeur Diesel Tucson Avante *EV Model i30 Santa Fe Avante Coupe Genesis Aslan (D-seg) Santa Fe F/L Equus *Plug-in Hybrid Model Grandeur Tucson ix F/L Grandeur Hybrid Sonata Hybrid Sonata Diesel Sonata F/L New Hybrid Model (C-seg) New EV Sonata PHEV U.S. Genesis Coupe F/L Veloster Turbo Grand Santa Fe Tucson ix F/L Genesis Santa Fe F/L Equus New EV i30 (GD) Santa Fe Sonata Elantra Elantra Azera Elantra Coupe Tucson New Hybrid Model Sonata PHEV Accent Europe i30 (GD) Santa Fe Grand Santa Fe ix35 F/L i20 i30 F/L i30 i20 F/L i10 Tucson Gasoline Electric Hybrid Azera New Hybrid Model China Langdog (MD) ix35 F/L Mingtu (D-seg) Accent F/L ix25 Sonata Tucson C&D-seg New Elantra Santa Fe Elantra HD Accent India/Brazil YF HB20X SUV i10 Santa Fe ix20 i20 Cross Creta Elantra HB20 (Hatchback) HB20 S B seg

11 Economic Overview

12 Management

13 Industry & Competitive Positioning

14 Industry & Competitive Positioning

15 Financial Overview

16 Financials Summary (Applicable to Common Stock) Market Cap 39.5T Total Revenue (2014) 89.3T EBITDA (2014) 10.1T EBITDA Margin (2014) 11.3% ROE (2014) 13.2% P/B (Curr) 0.6x Total Debt (Q3 2015) 61.2T P/S (2014) 0.4X Total Debt/Equity (Q3 2015) 0.9x P/E (2014) 5.5x

17 Income Statement & Balance Sheet In millions of KRW 2014A 2015E 2016E 2017E 2018E 2019E Revenue 89,256,319 89,591,952 95,096,789 98,755, ,516, ,504,736 Revenue Growth 2.2% 0.4% 6.1% 3.8% 2.8% 2.9% Operating Income 10,550,375 8,800,935 12,121,509 12,599,167 12,853,122 13,208,578 EBITDA 13,100,272 11,514,278 14,769,944 15,367,333 15,730,156 16,109,437 Net Income 8,248,569 6,912,439 9,463,933 9,836,867 10,035,144 10,312,668 EPS 27,037 24,044 33,370 35,166 36,380 37,919 In millions of KRW 2014A 2015E 2016E 2017E 2018E 2019E Cash 11,099,019 11,537,275 14,141,598 16,798,007 19,560,673 22,489,099 Total Assets 147,225, ,358, ,185, ,259, ,326, ,442,969 Total Debt 54,257,932 58,790,056 59,809,849 61,494,792 63,759,680 65,461,240 Total Liabilities 84,604,552 93,465,488 95,860,119 99,068, ,800, ,074,623 Shareholders Equity 62,620,565 67,893,492 73,324,971 79,190,969 85,526,246 92,368,346 Book Value Per Share 230, , , , , ,910

18 Valuation

19 Basic Comps Table & Price Targets Company Market Cap ($) 1 Year Performance 2014 EV/EBITDA 2016E EV/EBITDA 2014 P/E 2016E P/E Current P/B 2016E P/B Hyundai Motor 33.6bn -14% 6.8x 5.6x 5.5x 4.5x 0.6x 0.5x Hyundai Preferred 3.6x 2.9x 0.4x 0.3x Toyota Motor 206.4bn 2% 9.9x 9.4x 10.2x 9.9x 1.3x 1.3x Honda Motor 57.8bn 10% 9.8x 9.3x 12.7x 12.2x 1.0x 0.9x Ford Motor 53.3bn -6% 13.4x 12.9x 11.5x 8.7x 2.0x 1.9x General Motors 52.9bn 11% 7.8x 7.7x 12.6x 7.5x 1.6x 1.6x Nissan Motor 47.3bn 21% 8.5x 8.3x 9.7x 9.6x 1.1x 1.0x Mazda Motor 12.3bn -15% 6.1x 6.2x 9.6x 9.4x 1.6x 1.5x Mean 9.3x 9.0x 11.1x 9.6x 1.4x 1.4x Median 9.2x 8.8x 10.9x 9.5x 1.5x 1.4x Thesis 1 Thesis 2 1/3 SOTP 159,377 1/3 Implied 100,000 1/3 DCF 129,485 Weighted Price Target 388,862 Upside (Downside) 159% With arbitrage play to parity with common 598,847 Upside (Downside) 299%

20 Implied Multiples Valuation Valuation Range Implied by P/E Valuation Range Implied by P/B 2014 Selected Range 10.5x x Current Selected Range 1.3x - 1.6x 2016E Selected Range 9.0x x 2016E Selected Range x Valuation Range Implied by EV/EBITDA 2014 Selected Range 9.0x x Share Price 150, E Selected Range 8.5x - 9.5x Blended Average Target Price 300,000 Hyundai Motor Multiple Range Implied Share Price Implied Upside (Downside) Implied With 20% Korea Discount Implied Upside (Downside) EPS , x x 283, ,926 89% - 107% 227, ,740 51% - 66% EPS 2016E 33, x x 300, , % - 122% 240, ,959 60% - 78% BVPS CURRENT 250, x - 1.6x 326, , % - 168% 316, , % - 114% BVPS 2016E 304, x - 1.6x 395, , % - 225% 316, , % - 160% EBITDA PS , x x 342, , % - 154% 274, ,451 83% - 103% EBITDA PS 2016E 43, x - 9.5x 369, , % - 175% 295, ,065 97% - 120%

21 Sum-of-the-parts Analysis and Buy Two Get One Free Business Segment Valuation Metric Statistic Prevailing Subsector Multiple Enterprise Value Low High Low High Motor 2014 EBITDA 9,037, x * 15.0x * 108,451, ,564,060 Finance Q Book Value 9,111, x 1.3x 6,377,821 11,844,525 Other/Investments Q Book Value 15,502, x ** 3.8x ** 46,508,505 58,135,631 (in millions of KRW) *Cyclically weighted average ** 1.25(Prevailing) to cancel discount Total Firm Value 161,337, ,544,216 Less: Net Debt 24,825,114 24,825,114 Book Value of Finance Division 9,111,173 Total Equity Value 136,512, ,719,102 Book Value of Investments 15,502,835 Fully Diluted Shares Outstanding Book Value of Hyundai Less Auto Business 24,614,008 Per Share 92,746 SOTP Equity Value Current Price (Common) 150,000 Current Share Price Current Price (Preferred) 97,000 Premium (Discount) to Market 243% 354% Equity Value With 20% Korea Discount 411, ,759 P/B less auto business 1.05x Discounted Premium (Discount) 174% 263%

22 DCF Output Sensitivity Analysis Exit Multiple (2019 EBITDA) Sensitivity Analysis Growth Single Price Target 485,567 Post-Korea Discount 388,454 Upside 159% WACC 5% 6% 7% 8% 9% 6.5x 380, , , , , x 429, , , , , x 477, , , , , x 525, , , , , x 573, , , , ,742 WACC 5% 6% 7% 8% 9% 1.5% 673, , , , , % 774, , , , , % 916, , , , , % 1,128, , , , , % 1,482, , , , ,334

23 Risk

24 Qualitative Risk Key Specific Risks Failure in pipeline meeting consumer demand in end markets Control of company passing to Chairman s son Expectation of market share loss in South Korea Further actions of poor corporate governance Geopolitical risk (North Korea) R&D to production time decreased from 40 months to 19 months over the past 10 years (industry leading efficiency) gives Hyundai an edge when failures to meet demand do occur (as they are occasionally bound to) exactly as we are currently seeing Webbed ownership structure Co-CEO and three Co-Presidents limit the authority of any one individual (they are also much younger, i.e years, than the Chairman). The newly established shareholder communication committee could also block such an action Market has expected this for over 20 years and the shift simply has not been realised Given acts from legislature (illegality of acting against shareholder interests), the jailing of a number of business executives and the establishment of a powerful shareholder communication committee we see further risk in this area extremely low Neighboured by nuclear-armed communist country. Already trade at significant discount (factored in) because of this which we feel more than reflects the true risk (at least fully priced in South Korea represents 14% of sales). Geographic diversity in both production and sales largely mitigates this (though there would of course be additional production and governance concerns)

25 Quantitative Risk

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