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Look beyond earnings concerns to robotics/autonomous driving momentum

4Q25 results disappoint, but robotics/autonomous driving to come into focus

While Hyundai Motor (HMC) posted disappointing 4Q25 results, it expects 2026 operating profit to grow roughly 12% YoY to W12.9tr (based on the mid-point of the target OP margin range). The guidance looks encouraging, particularly given the firm’s conservative FX assumption. We believe it is time to refocus on the rollout of Hyundai Motor Group’s (HMG) robotics strategy; the humanoid robot Atlas passed the proof-of-concept stage at end-2025, and key events going forward include: 1) the opening of the Robot Metaplant Application Center (RMAC) in 2H26; 2) supply to external customers in 2027; and 3) deployment at software-defined factories (SDFs), including HMGMA, from 2028. Expectations surrounding Boston Dynamics, including potential strategic investments by partner/affiliate companies and a possible future IPO, remain intact; HMC holds a 27% stake in the company. In addition, the robotics mobility platform MobED (developed by HMG’s Robotics LAB) is set to begin full-fledged sales in 1H26.

The autonomous driving business is also likely to accelerate. HMG appointed a new advanced vehicle platform (AVP) division head, and a smart car demo is scheduled for 2H26. Plans for GPU utilization (data centers, etc.) also warrant attention. With expectations for robotics and autonomous driving remaining intact, we lifted our target P/E from 10.7x to 14x, in line with the valuation observed when Apple Car?related expectations drove a re-rating. We raise our target price from W520,000 to W640,000.

Earnings miss on multiple cost factors; tariff contingency plans in place

For 4Q25, HMC posted revenue of W46.8tr (+0.5% YoY; 3% below the consensus of W48.3tr), operating profit of W1.69tr (-40% YoY; 37% below the consensus of W2.68tr), and an OP margin of 3.6% (-2.6%p YoY, -1.8%p QoQ). Earnings disappointed due to the recognition of about W570bn in additional costs, including one-off items. Major factors included an increase in fixed costs due to new model launches (W200bn), higher labor costs tied to ordinary wage adjustments (W140bn), quality-related expenses at Hyundai KEFICO (W100bn), and accounting adjustments related to lease incentives at Hyundai Capital America (W130bn). The tariff impact totaled W1.45tr (down from W1.8tr in 3Q25), of which management estimates around W900bn (60%) was offset. Of the full-year impact of W4.1tr, we believe roughly W2tr was offset. The firm expects the tariff impact in 2026 to remain little changed YoY and said contingency plans remain in place.