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(Photo= Yonhap news) |
[Alpha Biz= Reporter Kim Minyoung] Meritz Securities predicts that Hyundai Motor's stock price will increase following its upcoming share buyback announcement on the 28th. In a report released on the 20th, the firm noted that share buybacks create a short-term expansion in supply-demand dynamics, regardless of pre-existing market expectations.
The report highlighted that, unlike earnings announcements or order disclosures, share buybacks are unique events that can significantly impact stock price through increased market liquidity.
Meritz Securities also observed a decline in the correlation between Hyundai Motor and Kia’s stock prices with their market capitalization and performance metrics since 2020. The report pointed out that automotive sector valuations are often based on historical performance rather than future potential.
Despite strong earnings, stock prices have not necessarily reflected this performance. The report suggests that only when strong past earnings are returned to shareholders through dividends or share buybacks does market sentiment shift positively.
For instance, Kia’s stock price rose 61% during its share buyback period from January 26 to March 15 this year. Meritz Securities anticipates that attention will shift back to Kia after Hyundai Motor’s share buyback program concludes around October to November.
The firm expects Kia’s 2024 net profit to rise by 23% to KRW 1.08 trillion, and estimates a dividend of KRW 7,000 based on a 25% payout ratio.
Meritz Securities maintains a "Buy" rating on both Hyundai Motor and Kia, with target prices of KRW 340,000 and KRW 140,000, respectively.
Alphabiz Kim Minyoung (kimmy@alphabiz.co.kr)
