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Takeaways from 2024 CEO Investor Day

Key upcoming events: US retail sales data release and Korea Value-Up Index launch in September, listing of Indian subsidiary in October

During its CEO Investor Day event, Hyundai Motor (HMC) unveiled plans to buy back W4tr worth of shares over three years starting in 2025, meeting market expectations for stronger shareholder returns. We expect HMC to further enhance shareholder returns using proceeds from the IPO of its Indian subsidiary (set for October). Potential positives in September include the launch of the Korea Value-Up Index and the release of August US retail sales data. Despite concerns over negative retail auto sales growth in June and July and weaker-than-expected 2Q24 results from global OEMs, we expect August data to be favorable, as sales appear to have begun recovering from the impact of the CDK Global cyberattack in the third week of July. We also think HMC’s market share gains backed by its strong HEV lineup and price competitiveness deserve attention. We maintain our target price on HMC and retain the stock as our top pick.

Key takeaways: Higher shareholder returns, adjustments to xEV guidance, and increased investments over the medium/long term

Along with its shareholder return policy, the company announced a series of initiatives covering areas such as the government’s value-up program, xEV plans, production strategies, battery solutions, software-defined vehicles (SDVs)/autonomous driving, medium/long-term investment plans/financial goals, the planned IPO in India, and the hydrogen business. The firm raised its total shareholder return (TSR) target for 2025-27 by 10%p to 35%+, with plans to buy back W1.33tr worth of shares annually over a three-year period (W4tr in total). Of note, the firm said it would take into account preferred stock discounts while executing buybacks. Meanwhile, the TSR target of 35%+ does not include cash from the upcoming listing of the Indian subsidiary; plans for using the proceeds will be announced after the listing. Another newly introduced shareholder return policy is a minimum DPS (W10,000) starting in 2024 and quarterly dividends of W2,500 (+25% increase) from 2025. The company also presented an average ROE target of 11-12% for 2025-27.

HMC announced a number of changes to its xEV plans. For HEVs, the firm maintained its short-term sales target while raising its medium/long-term target; the 2028 HEV sales target was raised by 40% to 1.33mn units, with North America expected to account for 52% of that figure (vs. 17% for Europe and 18% for Korea). For BEVs, the company presented a 2024 target of 300,000 units (vs. 330,000 units during 2023 CEO Investor Day and 300,000 units during the 4Q23 earnings call), a 2027 target of 840,000 units (vs. a 2026 target of 940,000 units during 2023 CEO Investor Day), and a 2030 target of 2mn units (unchanged). In addition, the company plans to launch extended-range electric vehicles (EREVs) in 2027.

Investment plans/financial goals: HMC plans to invest W120.5tr through 2033, which represents a nearly 10% increase from its investment plan shared last year. The incremental investment (W11.1tr) will be allocated to R&D (W7.1tr), and capex (W4.5tr). We are particularly encouraged by the firm’s medium/long-term OP margin target (8-9% in 2024, 9-10% in 2027, and over 10% in 2030).