Hyundai to stretch winning streak with first-quarter profit rise

SEOUL Wed Apr 25, 2012 3:17pm EDT

1 of 2. A model is pictured in front of a HYUNDAI logo at Auto China 2012 in Beijing April 24, 2012.

Credit: Reuters/Jason Lee

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SEOUL (Reuters) - Shares in Hyundai Motor (005380.KS) have risen almost 11 percent this month, while most other global auto brands have fallen - another sign that the South Korean car maker is motoring in the fast lane.

From Europe to China, the world's biggest auto market, Hyundai is shifting more cars while industry sales sputter.

In Europe, industry sales dropped 8 percent in the first quarter, but Hyundai posted double-digit sales growth, and is expected to post more gains thanks to new models such as the fully-revamped i30 compact.

Hyundai also increased its Chinese sales in January-March, in a market that shrank 1.3 percent, analysts said. [ID:nL3E8FB1U9] Hyundai plans to start production at new plants in China and Brazil this year, after a new factory went into production in Russia last year. It has capped global production capacity at 7 million vehicles, saying it doesn't want to follow Toyota, once its benchmark, which suffered from a major recall crisis after it ramped up global capacity.

In the United States, Ford Motor (F.N) and others have also upgraded their 2012 sales goals after an unexpectedly strong first quarter as drivers finally put the 2008-09 downturn behind them and began replacing ageing gas guzzlers.

The maker of the Sonata sedan and Elantra compact increased its U.S. sales by 15 percent in January-March, edging the overall market's 14 percent gain, but its market share slipped to 4.7 percent from 5.1 percent as its stretched production capacity meant it couldn't readily boost output.

The world's fifth-biggest automaker, with affiliate Kia Motors (000270.KS), is expected to report later on Thursday a 10 percent increase in January-March net profit to 2.07 trillion won ($1.81 billion), according to a consensus forecast by Thomson Reuters I/B/E/S, on strong overseas sales.

Full-year 2012 net profit is forecast at a record $7.76 billion, according to Thomson Reuters SmartEstimates.

"Hyundai's sales gains in major markets are not slowing," said Song Sang-hun, a StarMine top-ranked analyst at Kyobo Securities. "The market was concerned that a weakening yen would help Japanese rivals boost sales and win back market share, but this actually had little impact on Hyundai's sales in the first quarter."

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Hyundai snapshot: r.reuters.com/jev47s

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Once derided for its poor quality, boxy cars, Hyundai, under Chairman Chung Mong-koo, has moved up the quality ladder and is envied by rivals as it has outpaced the market by offering stylish models at affordable prices. Its operating margin of around 10.5 percent is more than four times that of Toyota.

Hyundai has also taken full competitive advantage of a cheaper South Korean won, but its Japanese rivals are fast recovering from last year's natural disaster setbacks and should report much improved January-March profits.

The current quarter outlook is bright, with strong seasonal demand and the launch of new models including a revamped sleeker-looking Santa Fe sport utility vehicle. Earnings could top last year's record 2.3 trillion won, according to StarMine SmartEstimates.

While Hyundai shares have raced ahead in April, shares of Japan's Toyota Motor (7203.T), Honda Motor (7267.T) and Nissan Motor (7201.T) have fallen, as have those of Ford, General Motors (GM.N) and Volkswagen (VOWG_p.DE).

"Hyundai's profit growth is seen slowing this year after it accelerated in recent years. But compared to other sectors, it will post solid profits, which makes its stock attractive," said Jung Sung-man, a fund manager at Plus Asset Management, which owns Hyundai stock.

($1 = 1140.8500 Korean won)

(Reporting by Hyunjoo Jin; Editing by Ian Geoghegan)

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