GoldmanSachs HyundaiMobis (012330KS) ElectrificationasmajorgrowthdriverbutmarginrecoverymaytaketimeIniti

10 April 2023 | 3:42PM KST
Hyundai Mobis (012330.KS)

Neutral
Electrification as major growth driver, but margin recovery may take time;
Initiate at Neutral
012330.KS 12m Price Target: W245,000 Price: W213,500 Upside: 14.8%

Kee Ryung Kim
+82(2)3788-1728 | keeryung.kim@gs.com
Goldman Sachs (Asia) L.L.C., Seoul Branch
Kota Yuzawa
Heavy upfront investment before rewards can be reaped +81(3)6437-9863 | kota.yuzawa@gs.com
Goldman Sachs Japan Co., Ltd.
Hyundai Mobis is Hyundai Motor Group’s (HMG’s) largest tier 1 auto
Hiroki Muramatsu
parts supplier. Plugged into Hyundai and Kia’s aggressive EV +81(3)6437-9872 | hiroki.muramatsu@gs.com
Goldman Sachs Japan Co., Ltd.
ramp-up, the electrification business is set to be the next growth
driver for Hyundai Mobis. However, we believe steep revenue
growth (+15% 8-yr CAGR) in the electrification business overstates
the underlying performance (+8% 8-yr CAGR for the value added Key Data __________________________________
Market cap: W19.6tr / $14.8bn
business), as a significant portion of revenue comes from the Enterprise value: W19.7tr / $15.0bn
3m ADTV: W42.0bn / $32.9mn
pass-through of battery cost. We expect earnings to remain South Korea
Korea Automobiles
sluggish, hovering between the 4-5% level until 2030E, due to large M&A Rank: 3
Leases incl. in net debt & EV?: Yes
upfront investments in electrification and slow progress in
GS Forecast ________________________________
expanding sales to customers other than HMG. We initiate the 12/22 12/23E 12/24E 12/25E
Revenue (W bn) 51,906.3 55,877.6 58,545.1 60,039.7
company with a Neutral rating and 12-month TP of W245,000 based EBITDA (W bn) 2,924.6 3,599.1 3,797.5 4,074.6
on a P/B-ROE valuation methodology, implying 13% upside. EPS (W) 27,017 29,105 33,927 35,823
P/E (X) 7.9 7.3 6.3 6.0
P/B (X) 0.5 0.5 0.5 0.4
Dividend yield (%) 1.9 2.8 3.5 3.7
Hyundai Mobis vs. Denso N debt/EBITDA (ex lease,X) (0.3) (0.0) (0.0) (0.1)
CROCI (%) 6.1 7.0 6.5 6.4
As the No.1 South Korean auto parts maker in terms of sales,
2aeb9e8b174644998c7303f5a989d953
FCF yield (%) 4.7 0.1 4.1 5.8
Hyundai Mobis is often compared with Japanese auto parts maker
12/22 3/23E 6/23E 9/23E
Denso (Buy, on CL). At the moment, we believe Denso has a EPS (W) 6,975 7,057 6,999 7,302
marked advantage in terms of margins, customer diversity, and GS Factor Profile ____________________________
electrification product competitiveness. At the same time, we see Growth
prospects for margin improvement along with HMG EV sales Financial Returns
growth at Hyundai Mobis, which is actively investing in products Multiple
that will support HMG’s electrification drive. Introduction of a

Integrated
competitive EV-dedicated platform would still take until 2026 for the
Lexus brand and 2027 for the Toyota brand, who are Denso’s main Percentile 20th 40th 60th 80th 100th
customers. We will be focusing on how far Mobis can close the 012330.KS relative to Asia ex. Japan Coverage
earnings gap with Denso over the next few years. 012330.KS relative to Korea Automobiles
Source: Company data, Goldman Sachs Research estimates.

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analysts with FINRA in the U.S.
For the exclusive use of Tim Sitnikov (Tim.sitnikov@global-infra.com) at Global Infrastructure Management, LLC
Goldman Sachs Hyundai Mobis (012330.KS)
Hyundai Mobis (012330.KS) Income Statement (W bn) _________________________________

Neutral Rating since Apr 10, 2023 Total revenue
12/22
51,906.3
12/23E
55,877.6
12/24E
58,545.1
12/25E
60,039.7
Cost of goods sold (45,919.1) (49,210.3) (51,208.7) (52,423.7)
SG&A (2,589.8) (2,673.4) (2,833.1) (2,936.7)
Ratios & Valuation _______________________________________ R&D (1,370.9) (1,626.0) (1,703.7) (1,747.2)
12/22 12/23E 12/24E 12/25E Other operating inc./(exp.) -- -- -- --
P/E (X) 7.9 7.3 6.3 6.0 EBITDA 2,924.6 3,599.1 3,797.5 4,074.6
P/B (X) 0.5 0.5 0.5 0.4 Depreciation & amortization (898.1) (1,231.2) (997.8) (1,142.5)
FCF yield (%) 4.7 0.1 4.1 5.8 EBIT 2,026.5 2,367.9 2,799.7 2,932.1
EV/EBITDAR (X) 6.6 5.5 5.2 4.8 Net interest inc./(exp.) 177.1 84.3 89.2 108.9
EV/EBITDA (excl. leases) (X) 6.5 5.4 5.1 4.7 Income/(loss) from associates 1,221.6 1,108.7 1,261.1 1,340.7
CROCI (%) 6.1 7.0 6.5 6.4 Pre-tax profit 3,362.6 3,560.9 4,150.1 4,381.7
ROE (%) 6.8 6.9 7.6 7.5 Provision for taxes (875.4) (890.2) (1,037.5) (1,095.4)
Net debt/equity (%) (1.2) 0.4 0.5 (0.0) Minority interest (2.0) (2.0) (2.0) (2.0)
Net debt/equity (excl. leases) (%) (2.0) (0.3) (0.2) (0.7) Preferred dividends (0.0) -- -- --
Interest cover (X) 26.8 34.5 40.2 41.8 Net inc. (pre-exceptionals) 2,485.2 2,668.7 3,110.6 3,284.3
Days inventory outst, sales 33.5 35.6 35.9 36.1 Post-tax exceptionals 0.0 -- -- --
Receivable days 64.0 68.4 69.3 70.1 Net inc. (post-exceptionals) 2,485.3 2,668.7 3,110.6 3,284.3
Days payable outstanding 59.5 62.6 63.5 64.0 EPS (basic, pre-except) (W) 27,017 29,105 33,927 35,823
DuPont ROE (%) 6.6 6.7 7.3 7.3 EPS (diluted, pre-except) (W) 27,016 29,105 33,927 35,823
Turnover (X) 0.9 0.9 0.9 0.9 EPS (basic, post-except) (W) 27,017 29,108 33,927 35,823
Leverage (X) 1.5 1.5 1.5 1.5 EPS (diluted, post-except) (W) 27,016 29,105 33,927 35,823
Gross cash invested (ex cash) (W) 47,556.2 52,470.7 56,525.4 60,766.9 DPS (W) 4,000 6,000 7,500 8,000
Average capital employed (W) 35,765.8 38,401.3 41,023.3 43,498.0 Div. payout ratio (%) 14.8 20.6 22.1 22.3
BVPS (W) 410,911 434,703 462,297 490,495
Balance Sheet (W bn) ____________________________________
Growth & Margins (%) ____________________________________ 12/22 12/23E 12/24E 12/25E
12/22 12/23E 12/24E 12/25E Cash & cash equivalents 4,088.2 3,530.7 3,538.6 3,741.4
Total revenue growth 24.5 7.7 4.8 2.6 Accounts receivable 10,088.8 10,860.7 11,379.2 11,669.7
EBITDA growth 1.7 23.1 5.5 7.3 Inventory 5,267.2 5,644.7 5,873.9 6,013.3
EPS growth 6.1 7.7 16.6 5.6 Other current assets 6,215.5 6,526.3 6,370.9 6,448.6
DPS growth 0.0 50.0 25.0 6.7 Total current assets 25,659.7 26,562.4 27,162.5 27,873.0
EBIT margin 3.9 4.2 4.8 4.9 Net PP&E 9,370.7 11,022.7 12,359.5 13,619.5
EBITDA margin 5.6 6.4 6.5 6.8 Net intangibles 965.1 1,053.0 1,143.0 1,232.1
Net income margin 4.8 4.8 5.3 5.5 Total investments 18,082.5 19,294.3 20,686.6 22,144.5
Other long-term assets 1,328.7 1,395.1 1,464.9 1,538.1
Price Performance _______________________________________ Total assets 55,406.7 59,327.5 62,816.4 66,407.1
012330.KS (W) KOSPI Accounts payable 8,143.7 8,727.4 9,081.8 9,297.3
Short-term debt 1,883.5 1,610.2 1,336.9 1,063.6
280,000 3,000
Short-term lease liabilities -- -- -- --
260,000 2,800 Other current liabilities 1,449.0 1,593.9 1,593.9 1,593.9
Total current liabilities 11,476.2 11,931.4 12,012.6 11,954.7
240,000 2,600
Long-term debt 1,462.7 1,788.5 2,114.3 2,380.1
220,000 2,400 Long-term lease liabilities 297.0 297.0 297.0 297.0
200,000 2,200 Other long-term liabilities 4,363.2 5,441.7 5,995.6 6,791.1
Total long-term liabilities 6,122.9 7,527.1 8,406.8 9,468.2
180,000 2,000 Total liabilities 17,599.1 19,458.6 20,419.4 21,422.9
2aeb9e8b174644998c7303f5a989d953
Preferred shares 0.1 0.1 0.1 0.1
Jul-22 Oct-22 Jan-23 Apr-23
Total common equity 37,799.1 39,858.4 42,384.5 44,969.7
3m 6m 12m Minority interest 8.4 10.4 12.4 14.4
Absolute (0.2)% 5.7% 0.7% Total liabilities & equity 55,406.7 59,327.5 62,816.4 66,407.1
Rel. to the KOSPI (8.3)% (5.2)% 9.0% Net debt, adjusted (741.9) (131.9) (87.3) (297.7)
Source: FactSet. Price as of 7 Apr 2023 close.
Cash Flow (W bn) ________________________________________
12/22 12/23E 12/24E 12/25E
Net income 2,485.3 2,668.7 3,110.6 3,284.3
D&A add-back 898.1 1,231.2 997.8 1,142.5
Minority interest add-back 2.0 2.0 2.0 2.0
Net (inc)/dec working capital (764.1) (565.7) (393.3) (214.4)
Other operating cash flow (467.2) (346.0) (498.5) (578.1)
Cash flow from operations 2,154.1 2,990.1 3,218.5 3,636.3
Capital expenditures (1,220.8) (2,971.1) (2,424.5) (2,491.6)

Acquisitions (227.3) -- -- --
Divestitures 3.3 -- -- --
Others (159.1) (103.2) (131.1) (117.1)
Cash flow from investing (1,604.0) (3,074.3) (2,555.6) (2,608.8)
Repayment of lease liabilities -- -- -- --

Dividends paid (common & pref) (368.1) (412.8) (584.5) (699.1)
Inc/(dec) in debt 107.0 52.5 52.5 (7.5)
Other financing cash flows (356.7) (113.1) (123.1) (118.1)
Cash flow from financing (617.8) (473.4) (655.1) (824.7)
Total cash flow (67.7) (557.5) 7.8 202.9
Free cash flow 933.3 19.0 794.1 1,144.7
Source: Company data, Goldman Sachs Research estimates.
10 April 2023 2
Initiate at Neutral with key risks: Electrification margin, HMG volume recovery, circular
ownership
Our 2023-2025 EBIT estimates are -6%/-2%/-5% lower than BBG consensus, as we
believe that there is no significant catch-up production opportunity left for Korean OEMs.
We also think that the earnings contribution from electrification will emerge slowly due
to heavy upfront investment. Risks include margin deterioration/improvement in
electrification business, larger- or slower-than-expected HMG volume recovery, and
HMG unwinding of circular ownership.
2aeb9e8b174644998c7303f5a989d953
10 April 2023 3
Key charts
Exhibit 1: Historically, volume recovery led to parts makers’ margin Exhibit 2: Yet, we see no significant catch-up production
improvement opportunity left for Korean OEMs
Historical HMG production and margin gap between OEM and Hyundai Historical HMG production growth vs. OPM outlook for OEMs and
Mobis Hyundai Mobis
(k5,000
unit) 20% 10%
le 9,000 0%
Mobis 9%
15%
8,000 -1%
8%
7,000 10%
-2%
90000 7%
6,000
-3% 5%
5,000 80000 6%
70000 -4%
4,000 0% 5%
Title
60000 -5%
8 3,000
9 10 11 12 13 14 -5% 30.0 4%
50000 -6%
2,000 3%
40000 25.0
-7% -10%
1,000 2%
30000 20.0
- -8% -15%
20000 1%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 120% 15.0
HMG production yoy growth Hyundai/Kia Avg. OPM (RHS) 8,5
10000 -20% 0%
Hyundai Motor Group production Margin gap (Mobis-OEM), excl. A/S (RHS) Mobis Module/Core parts10.0
100% OPM (RHS)
0 8,0
Source: Company data, Data compiled by Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
Exhibit 3: Electrification revenue to grow at +15% CAGR by 2030E, Exhibit 4: Expect margin improvement from production, yet not to
but excluding battery pass-through, +8% CAGR the level of 2011-2015
Hyundai Mobis electrification revenue outlook Hyundai Mobis - OP estimates by segment (W bn)
3,500 12.0%
3,000
10.0%
2,500
8.0%
2,000
1,500 6.0%
1,000
4.0%
500
2.0%
-
2aeb9e8b174644998c7303f5a989d953
(500) 0.0%
AS Electrification Core Parts Module Assembly OPM% (RHS)
Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
Exhibit 5: We see a big difference in auto parts margin between Exhibit 6: Further success in HMG battery electric vehicles (BEV) is
Hyundai Mobis and Denso likely to create cost/quality advantage for Hyundai Mobis
Hyundai Mobis vs. Denso - Operating profits by segment (2022, GSe) BEV sales comparison (k)
25.0% 1,400
Denso Hyundai Mobis
20.0% 1,200
15.0% 1,000
10.0% 800
600
5.0%
400
0.0%
200
-5.0%
-
2020 2021 2022 2023E 2024E 2025E
Toyota BEV Hyundai Group BEV
10 April 2023 4
Investment view
We expect margin improvement from volume recovery to be minimal this year

Historically, volume recovery has led to an improvement in parts makers’ margins. While
2023E should be the year of volume recovery from catch-up production for major global
automakers, we expect Hyundai Motor Company and Kia to see modest yoy volume
growth due to a high base effect. Hyundai and Kia were less affected than peers by the
global semis shortage over the past two years, thanks to very strong supply chain
management and preemptive parts/component sourcing. We make a conservative
estimate of +2% and +3% yoy volume growth for Hyundai and Kia this year, and expect
this will lead to modest volume impact on Hyundai Mobis.
Our 2023-2025 EBIT estimates are -6%/-2%/-5% lower than Bloomberg consensus, as
we believe that there is no significant catch-up production opportunity left for Korean
OEMs. We also think that the earnings contribution from electrification will emerge
slowly due to heavy upfront investment.
Exhibit 7: Historically, volume recovery led to parts makers’ margin Exhibit 8: Yet, we see no significant catch-up production
improvement opportunity left for Korean OEMs
Historical HMG production and margin gap between OEM and Hyundai Historical HMG production growth vs. OPM outlook for OEMs and
Mobis Hyundai Mobis
(k5,000
unit) 20% 10%
le 9,000 0%
Mobis 9%
15%
8,000 -1%
8%
7,000 10%
-2%
90000 7%
6,000
-3% 5%
5,000 80000 6%
70000 -4%
4,000 0% 5%
Title
60000 -5%
8 3,000
9 10 11 12 13 14 -5% 30.0 4%
50000 -6%
2,000 3%
40000 25.0
-7% -10%
1,000
30000 2%
20.0
2aeb9e8b174644998c7303f5a989d953
- -8% -15%
20000 1%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 120% 15.0
HMG production yoy growth Hyundai/Kia Avg. OPM (RHS) 8,5
10000 -20% 0%
Hyundai Motor Group production Margin gap (Mobis-OEM), excl. A/S (RHS) Mobis Module/Core parts10.0
100% OPM (RHS)
0 8,0
Source: Company data, Data compiled by Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
10 April 2023 5
Exhibit 9: Margin improvement from production, yet not to the level Exhibit 10: Hyundai Motor Group’s weak China sales led to a steep
of 2011-2015 decline in Hyundai Mobis OPM
Hyundai Mobis - OP estimates by segment (W bn) Hyundai Mobis - China revenue and consolidated OPM
3,500 12.0% (W bn) (%, OPM)

12,000 12.0%
3,000
10.0%
10,000 10.0%
2,500
8.0% 8,000 8.0%
2,000
6,000 6.0%
1,500 6.0%
4,000 4.0%
1,000
4.0%
500 2,000 2.0%
2.0% - 0.0%
-
(500) 0.0%
AS Electrification Core Parts Module Assembly OPM% (RHS) China revenue OPM % (RHS)
Next earnings driver - electrification product - takes time to see margin contribution
Hyundai Mobis provides Battery System Assembly, Integrated Charging Control Unit,
and Power Electric systems for Hyundai and Kia electrified vehicles.
n Battery System Assembly (BSA): BSA consists of a battery pack, BMS (Battery
Management System), cooling system, and power shutoff device as integrated
modules. BSA is responsible for stable supply of electric energy to the motor while
storing regenerative energy during deceleration. Hyundai Mobis manufactures
battery system by assembling battery cells (that are sourced from battery cell
makers) into pack and modules.
n Integrated Charging Control Unit (ICCU): consists of onboard charger and DC-DC
converter.
n Power Electric (PE): 3-in-1 integrated system for motor, inverter and reducer.
2aeb9e8b174644998c7303f5a989d953
Plugged into Hyundai and Kia’s aggressive EV ramp-up, the electrification business is
set to be the next growth driver for Hyundai Mobis. The division has been growing along
with Hyundai and Kia electrified vehicles growth, recording a steep revenue growth
trajectory of +50%/+45%/+59% for 2020/21/22 (vs. Hyundai/Kia NEV growth of
+106%/+47%/+37% for the same period). Taking into consideration HMG’s long-term
BEV sales target of 3mn units by 2030E and the group’s growing presence in the EV
market, we expect Hyundai Mobis’s electrification business revenue to grow at a CAGR
of +15% until 2030E. At the same time, we believe Hyundai Mobis’s steep revenue
growth in the electrification business does not fully reflect the underlying
performance, as revenue is inflated by a large portion that comes from the
pass-through of battery cost. In order to see the value-added portion of Hyundai
Mobis’s electrification revenue, we strip out the battery cost and expect that excluding
battery pass-through, value-added electrification revenue should grow at a more
modest +8% CAGR until 2030E.
We estimate that pass-through battery revenue accounted for 65-70% for Hyundai
Mobis’s electrification revenue in 2022, inflating the overall revenue. While we believe
10 April 2023 6
OPM for value-added electrification business has the potential to reach the double-digit
level in the long term, the inflated battery pass-through, in turn, deflates the
electrification margin and means limited room for meaningful profitability gain from the
electrification business for Hyundai Mobis.
Exhibit 11: Electrification business to be the main revenue driver, Exhibit 12: Excluding battery pass-through, value-added
growing at +15% CAGR by 2030E electrification to grow +8% CAGR
Hyundai Mobis - Electrification revenue outlook (including battery Hyundai Mobis - Electrification revenue outlook (excluding battery
pass-through) pass-through)
(W bn) (k unit) (W bn) (k unit)

35,000 3,000 35,000 3,000
30,000 2,500 30,000 2,500
25,000 25,000
2,000 2,000
20,000 20,000
1,500 1,500
15,000 15,000
1,000 1,000
10,000 10,000
500 5,000 500

5,000
- - - -
2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
HMG BEV sales (RHS) Electrification revenue HMG BEV sales (RHS) Electrification revenue excl. battery value
Exhibit 13: Battery cost inflating overall electrification revenue Exhibit 14: We expect electrification to reach break even next year
Hyundai Mobis - Electrification revenue breakdown yet see limited OPM growth due to inflated revenue
Hyundai Mobis - Electrification business profitability outlook
(W bn) (W bn) (OPM%)

35,000 700 3.0%
30,000 600 2.0%

500 1.0%
25,000
400
0.0%
20,000 300
-1.0%
200
15,000
-2.0%
100
2aeb9e8b174644998c7303f5a989d953
10,000 -3.0%
-
2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E -4.0%
5,000 (100)
(200) -5.0%
-
2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E (300) -6.0%
Battery cost pass-through Value-added electrification revenue Electrification OP (GSe) Blended Electrification OPM (RHS)
Source: Company data, Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research
Hyundai Mobis vs. Denso: Denso has edge, but Mobis’s electrification
business warrants re-evaluation
As the No.1 South Korean auto parts maker in terms of sales, Hyundai Mobis is often
compared with Japanese auto parts maker Denso. At the moment, we believe Denso
has a marked advantage in terms of margins, customer diversity, and electrification
product competitiveness. At the same time, we see prospects for margin improvement
along with HMG EV sales growth at Hyundai Mobis, which is actively investing in
products that will support HMG’s electrification drive. Introduction of a competitive
EV-dedicated platform by Denso’s main customer, Toyota, would still take until 2026 or
10 April 2023 7
2027. We will be focusing on how much Mobis can close the earnings gap on Denso
over the next few years.
Considerable difference in earnings performance

Hyundai Mobis’s OPM was more resilient than Denso’s amid lower production during
the pandemic. This was partly attributable to Mobis’s A/S business generating stable
recurring income from an installed base. We think another reason was that the impact
of lower production due to semiconductor shortages for Japanese automakers - key
customers for Denso - was greater at Denso than at the Hyundai Motor Group. On the
other hand, we think Denso’s OPM will trend well above that of Mobis over the next
few years. This is because Denso has many opportunities to increase sales per vehicle
thanks to electrification and the shift to autonomous driving with products such as
inverters, air-conditioning systems, and ADAS. Mobis also aims to expand sales of
products that respond to electrification as the Hyundai Motor Group shifts focus to EVs,
but we expect earnings to remain sluggish, with the exception of A/S business, due to
large upfront investments and slow progress in expanding sales to customers other
than the Hyundai Motor Group. We think Denso will retain its relative competitiveness
going forward and therefore maintain our Buy rating (on Conviction List). In contrast, we
are Neutral rated on Mobis, as we think it will take time to improve margins.
Exhibit 15: Denso’s margin forecast to be higher Exhibit 16: Large difference in earnings excluding A/S business
Hyundai Mobis vs. Denso - OPM comparison Hyundai Mobis vs. Denso - OPM by segment
9.0% 30.0%
8.0%
25.0%
7.0%
6.0% 20.0%
5.0%
15.0%
4.0%
3.0% 10.0%
2.0%
5.0%
2aeb9e8b174644998c7303f5a989d953
1.0%
0.0% 0.0%
2018 2019 2020 2021 2022 2023E 2024E 2018 2019 2020 2021 2022 2023E 2024E
Hyundai Mobis Denso Hyundai Mobis Module/Core parts Hyundai Mobis A/S Denso
Source: Company data, Goldman Sachs Global Investment Research Source: Company Data, Goldman Sachs Global Investment Research
Denso has edge in terms of product competitiveness

Denso and Mobis do not disclose margins by product segment, but we estimate OPM
as shown in Exhibit 17. While we believe Denso currently secures double-digit (%) OPM
in the powertrain systems business, which accounts for around 20% of company-wide
sales, we think margin prospects are likely to become gradually more challenging amid
the shift to EVs. That said, the company’s remaining businesses, which account for
around 80% of sales, are all in fields expected to see strong growth on the shift to EVs
and autonomous driving. In particular, we estimate that Denso secured OPM of 7% on
inverters and other electrification businesses in 2021, and that this has created the large
gap in earnings to Mobis’s loss-making electrification business. Denso has supported
Toyota Motor in its hybrid electrified vehicle (HEV) business for the last 10-20 years,
resulting in a substantial top-line growth for the electrification business and mature
10 April 2023 8
investments. In recent years, the company has also widened its customer base beyond
Toyota, proactively expanding its top line further. Mobis expects its electrification
business to turn profitable as well over the next several years in tandem with the
Hyundai Motor Group’s active shift to EVs, but we expect it will still take time for the
company to close the gap to Denso.
Accordingly, customer diversification the main differentiator

Denso supplies a wide range of OEMs other than Toyota with inverters, but also
supplies products to other businesses, such as air-conditioning. Key customers span a
broad range of automakers, including Honda, Stellantis, Ford, GM, Subaru, Suzuki,
Mazda, Hyundai, Nissan, and VW. In contrast, Hyundai Motor Group still accounts for
around 90% of Mobis’s customer base. We view customer diversity as a sign of product
competitiveness, and will be closely monitoring Mobis’s top-line growth strategy going
forward. In particular, we believe an early shift to 800V products in the electrification
business in tandem with Hyundai Motor Company could foster stronger technological
and cost competitiveness and lead to wider sales to companies other than Hyundai and
Kia. Furthermore, we view clarification of Mobis’s top-line growth strategy as a potential
inflection point that may not be too far away.
Exhibit 17: Denso’s auto parts business driving earnings Exhibit 18: Diverse customer base highlights product
Hyundai Mobis vs. Denso - Operating profits by segment (2022, GSe) competitiveness
Hyundai Mobis vs. Denso - Sales by customer
25.0% 100.0%
Denso Hyundai Mobis 90%
90.0%
20.0%
80.0%
15.0% 70.0%
60.0%
10.0% 51.4%
48.6%
50.0%
5.0% 40.0%
30.0%
0.0%
20.0%
10%
2aeb9e8b174644998c7303f5a989d953
-5.0%
10.0%
0.0%
Toyota Others Hyundai Others
Denso Hyundai Mobis
Source: Company Data, Goldman Sachs Global Investment Research Source: Company Data, Goldman Sachs Global Investment Research
Hyundai’s EV success is Mobis’s success

Hyundai Motor Group has taken the lead in its BEV strategy relative to Toyota, and we
expect 1.2mn BEV sales in 2025 which is much higher than our forecast of Toyota’s
0.5mn BEV sales. Further success in Hyundai Motor Group BEV is likely to create a
cost/quality advantage for Hyundai Mobis through economy of scale and 800V
technological readiness, in our view. However, we note that Toyota has high exposure to
HEV sales and we expect its electrified vehicle sales will reach 5.7mn in 2025. Denso
has commonized core components for EVs and HEVs so that it can enjoy significant
economies of scale. We expect a catch-up opportunity for Mobis but it may take time to
reach Denso’s level of scale and profitability in the electrification business.
10 April 2023 9
Exhibit 19: Hyundai takes lead in BEV Exhibit 20: HEV makes big difference
BEV sales comparison (k) Toyota electrified vehicle sales (k)
1,400 7,000
1,200 6,000
1,000 5,000
800 4,000
600 3,000
400 2,000
200 1,000
- -
2020 2021 2022 2023E 2024E 2025E 2020 2021 2022 2023E 2024E 2025E
Toyota BEV Hyundai Group BEV Toyota BEV Toyota HEV+PHEV+FCV
Exhibit 21: Strength in E-GMP

Hyundai Motor Group’s EV-dedicated platform
2aeb9e8b174644998c7303f5a989d953
Source: Company data
Valuation
Our 12-month target price of W245,000 is derived from P/B-ROE correlation based on
2023E results in order to better account for stable short-term earnings. Our P/B-ROE
correlation derives a target P/B of 0.63. We apply an additional 10% discount (historical
average of discrepancy between our derived target P/B and actual P/B) to derive our TP,
which results in W245,000, implying 13% upside vs our coverage average upside of
24%.
10 April 2023 10
Exhibit 22: 6.9% ROE in 2023E implies 0.63x P/B and target price of W245,000
Hyundai Mobis - P/BV to ROE analysis (2011-2022)
3.0
2.5
y = 8.4129x + 0.0536
R² = 0.904
2.0
1.5
1.0
0.5
-
0% 5% 10% 15% 20% 25% 30%
Source: Company data, Goldman Sachs Global Investment Research
Valuation not demanding relative to historical levels

Hyundai Mobis’s 12m forward valuation multiples (P/E, P/B, and EV/EBITDA) are around
the average or below the average of the stock’s historical trading range, and valuation
levels do not appear particularly demanding based on the current share price. We
assume investors will look to share price upside if positive catalysts emerge, including a
faster-than-expected margin recovery in the electrification business,
larger-than-expected Hyundai Motor Group volume growth and/or the potential
unwinding by Hyundai Motor Group of its circular ownership structure through corporate
2aeb9e8b174644998c7303f5a989d953
restructuring (as discussed in the Company Overview section of this report).
Exhibit 23: P/E trading below historical range Exhibit 24: P/B at the bottom of historical range
12m forward P/E 12m forward P/B
P/E +1 std -1 std Avg P/B +1 std -1 std Avg
13 3.0
12
2.5
11
2.0
10
9 1.5
8
1.0
7
0.5
6
5 0.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Company data, Quantiwise, Goldman Sachs Global Investment Research Source: Company data, Quantiwise, Goldman Sachs Global Investment Research
10 April 2023 11
Exhibit 25: EV/EBITDA trading broadly in line with historical average

12m forward EV/EBITDA
EV/EBITDA +1 std -1 std -1 std
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Company data, Quantiwise, Goldman Sachs Global Investment Research
M&A Framework: Rank of 3; we factor no M&A component into our target price
We see a low probability of Hyundai Mobis becoming an acquisition target, given its
tier-1 parts supplier position within the Hyundai Motor Group. We therefore assign
Hyundai Mobis an M&A rank of 3.
Key Risks, and what could make us turn more positive or negative on the
stock
Margin improvement/deterioration in EV-related business

Our lower-than-consensus OP estimates mainly come from our conservative take on
Hyundai Mobis’s electrification profitability, expecting the business to reach BEP in
2024E at the earliest. However, if Hyundai Mobis’s electrification margin sees a faster
2aeb9e8b174644998c7303f5a989d953
turnaround or steeper-than-expected margin growth, this could lead to a valuation
re-rating for the company. In particular, we believe an early shift to 800V products in the
electrification business in tandem with Hyundai Motor Group could foster stronger
technological and cost competitiveness and lead to wider EV-related sales to companies
other than Hyundai and Kia and faster-than-expected margin recovery. Conversely,
should our assumptions on the EV-related business prove too optimistic, Mobis’s margin
opportunity may be limited.
Larger-than-expected/smaller-than-expected HMG volume growth

We make a conservative estimate of +2% and +3% yoy volume growth for Hyundai and
Kia this year, and expect this will lead to modest volume impact on Hyundai Mobis. This
is significantly below Hyundai and Kia’s ambitious guidance of around +10% yoy volume
growth this year driven by pent-up demand. Larger-than-expected HMG volume growth
may pose an earnings upside opportunity for Hyundai Mobis’s module assembly
business, which accounted for 44% of 2022 revenue. On the other hand,
smaller-than-expected HMG volume could lead to a deterioration in module assembly
margin.
10 April 2023 12
Unwinding of circular ownership through group restructuring

A corporate restructuring plan for HMG has been widely discussed in the market as a
natural next step to complete leadership succession and also as a potential solution to
the group’s current circular ownership structure. No such plan has been announced by
the group since its earlier restructuring attempt was halted in 2018, as discussed in the
Company Overview section of this report. However, the potential governance risk from
the circular ownership structure has served as a discount factor for the Hyundai Mobis
stock price, and we believe Hyundai Motor Group’s unwinding of its complicated circular
ownership through group restructuring would be a valuation re-rating catalyst for
Hyundai Mobis. There are a variety of possible scenarios surrounding Hyundai Motor
Group’s potential restructuring plan. As the majority of the group’s subsidiaries are under
Hyundai Motor Company’s control, one potential solution could be the owner family
seeking to secure as high a stake in Hyundai Mobis (biggest shareholder of Hyundai
Motor Company) as possible, and thereby gaining stronger control of Hyundai Motor
Company and resolving circular ownership issues.
Earnings projections
We are below consensus

Our 2023-2025 EBIT estimates are -6%/-2%/-5% lower than BBG consensus, as we
believe that there is no significant catch-up production opportunity left for Korean OEMs.
We also think that the electrification earnings contribution will emerge slowly due to
heavy upfront investment.
Exhibit 26: We are below consensus

Goldman Sachs estimate vs. Bloomberg consensus
(W mn) FY23GSE BBG FY24GSE BBG FY25GSE BBG
New YoY Consensus Diff % New YoY Consensus Diff % New YoY Consensus Diff %
Sales 55,878 7.7% 56,931 -1.9% 58,545 4.8% 60,917 -3.9% 60,040 2.6% 63,705 -5.8%
2aeb9e8b174644998c7303f5a989d953
Operating profit 2,368 16.8% 2,528 -6.3% 2,800 18.2% 2,845 -1.6% 2,932 4.7% 3,097 -5.3%
Net profit 2,669 7.4% 3,023 -11.7% 3,111 16.6% 3,299 -5.7% 3,284 5.6% 3,378 -2.8%
OPM % 4.2% 4.4% -0.2%p 4.8% 4.7% 0.1%p 4.9% 4.9% 0.0%p
NPM % 4.8% 5.3% -0.5%p 5.3% 5.4% -0.1%p 5.5% 5.3% 0.2%p
Source: Bloomberg, Goldman Sachs Global Investment Research
Earnings projections and key financials

We forecast Hyundai Mobis’s revenue by segment, based on Hyundai Motor Group
production volume and/or UIO (Unit in Operation) and per-vehicle ASP in each business
segment. We derive electrification revenue based on Hyundai Motor Group’s electrified
vehicle volume and estimated contents-per-vehicle in respective powertrain.
n Revenue: We see top line growing by a +5% 3-year CAGR and +6% 8-year CAGR.
We expect legacy business in core parts, module assembly, and after-sales will see
low-single-digit growth, while we expect electrification business to grow at a CAGR
of +15% until 2030E. Excluding the battery pass-through, we expect electrification
revenue will grow at a CAGR of +8% until 2030E.
n COGS consists of raw material costs, and a fixed cost portion of COGS such as
labor and D&A. The COGS ratio saw a steep increase in 2021-22, due to the inflation
in raw material price and logistics costs. With raw material prices peaking out and
10 April 2023 13
logistics costs normalizing, we believe the COGS ratio will see a downward
trajectory, reaching the 2017-18 level of 87% by 2025E.
n SG&A expenses consist of labor, R&D, and general overhead costs. We expect the
company to increase its R&D initiatives with % of total revenue maintained at the
3% level, in line with 2023E estimate per company guidance, in order to remain
competitive in the fast growing industry.
n EBIT: Accordingly, we expect EBIT to grow at +13% 3-year CAGR and +7% 8-year
CAGR. We expect earnings to remain sluggish, with the exception of A/S business,
due to large upfront investments and slow progress expanding sales to customers
other than the Hyundai Motor Group. We expect Hyundai Mobis’s long-term OP
margin to hover between the 4-5% level until 2030E.
Exhibit 27: Hyundai Mobis - Consolidated P/L

Hyundai Mobis 2015 2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E
Consolidated P/L (W bn)
Revenue 36,020 38,262 35,145 35,149 38,049 36,627 41,702 51,906 55,878 58,545 60,040
EBIT 2,935 2,905 2,025 2,025 2,359 1,830 2,040 2,027 2,368 2,800 2,932
Pre-tax profits 4,213 4,111 2,734 2,475 3,214 2,118 3,195 3,363 3,561 4,150 4,382
Net income 3,055 3,038 1,568 1,889 2,291 1,529 2,352 2,485 2,669 3,111 3,284
EBITDA 3,476 3,551 2,735 2,739 3,180 2,686 2,877 2,925 3,599 3,798 4,075
# of shares outstanding (mn shares) 94.6 94.7 94.7 94.7 93.2 92.5 92.2 91.8 91.7 91.7 91.7
EPS (₩) 32,144 32,076 16,558 19,944 24,383 16,468 25,464 27,016 29,105 33,927 35,823
DPS (₩) 3,500 3,500 3,500 4,000 4,000 4,000 4,000 4,000 6,000 7,500 8,000
(yoy)
Revenue 2.5% 6.2% -8.1% 0.0% 8.2% -3.7% 13.9% 24.5% 7.7% 4.8% 2.6%
EBIT -4.4% -1.0% -30.3% 0.0% 16.5% -22.4% 11.5% -0.7% 16.8% 18.2% 4.7%
Net income -10.7% -0.6% -48.4% 20.4% 21.3% -33.2% 53.8% 5.7% 7.4% 16.6% 5.6%
EBITDA -2.6% 2.2% -23.0% 0.2% 16.1% -15.5% 7.1% 1.7% 23.1% 5.5% 7.3%
(% of sales)
EBIT 8.1% 7.6% 5.8% 5.8% 6.2% 5.0% 4.9% 3.9% 4.2% 4.8% 4.9%
Net income 8.5% 7.9% 4.5% 5.4% 6.0% 4.2% 5.6% 4.8% 4.8% 5.3% 5.5%
EBITDA 9.7% 9.3% 7.8% 7.8% 8.4% 7.3% 6.9% 5.6% 6.4% 6.5% 6.8%
Capex 11.5% 3.5% 2.1% 1.6% 2.2% 3.1% 2.3% 2.4% 5.3% 4.1% 4.1%
Depreciation 1.5% 1.7% 2.0% 2.0% 2.2% 2.3% 2.0% 1.7% 2.2% 1.7% 1.9%
R&D 1.6% 1.6% 2.0% 2.1% 2.5% 2.8% 2.8% 2.6% 3.0% 3.0% 3.0%
(Fixed cost)
Capex 4,135 1,329 724 560 828 1,119 954 1,221 2,971 2,424 2,492
Depreciation 541 646 710 714 821 856 837 898 1,231 998 1,142
R&D 575 626 689 754 965 1,012 1,167 1,371 1,676 1,756 1,801
2aeb9e8b174644998c7303f5a989d953
Exhibit 28: Hyundai Mobis - Key financial summary
Key financial summary
(FOREX)
₩/US$ 1,131 1,161 1,131 1,100 1,166 1,201 1,143 1,293 1,250 1,250 1,250
Revenue by product
Module/Core Parts 29,716 31,575 28,261 28,236 30,483 29,588 33,265 41,697 45,701 48,241 49,583
Electrification 0 0 1,173 1,850 2,797 4,195 6,093 9,676 13,391 14,535 14,906
Core Parts 10,910 11,619 6,695 7,521 8,033 7,397 7,979 9,333 9,483 9,893 10,178
Module Assembly 18,805 19,955 20,392 18,866 19,653 17,996 19,193 22,688 22,827 23,813 24,499
A/S 6,304 6,687 6,884 6,958 7,566 7,040 8,437 10,095 10,177 10,304 10,456
Total 36,020 38,262 35,145 35,149 38,049 36,627 41,702 51,906 55,878 58,545 60,040
(yoy)
Module/Core Parts 3.0% 6.3% -10.5% -0.1% 8.0% -2.9% 12.4% 25.3% 9.6% 5.6% 2.8%
Electrification 57.6% 51.2% 50.0% 45.3% 58.8% 38.4% 8.5% 2.6%
Core Parts 5.7% 6.5% -42.4% 12.3% 6.8% -7.9% 7.9% 17.0% 1.6% 4.3% 2.9%
Module Assembly 1.4% 6.1% 2.2% -7.5% 4.2% -8.4% 6.7% 18.2% 0.6% 4.3% 2.9%
A/S 0.7% 6.1% 2.9% 1.1% 8.7% -7.0% 19.8% 19.6% 0.8% 1.3% 1.5%
Total 2.5% 6.2% -8.1% 0.0% 8.2% -3.7% 13.9% 24.5% 7.7% 4.8% 2.6%
Revenue mix
Module/Core Parts 82% 83% 80% 80% 80% 81% 80% 80% 82% 82% 83%
Electrification 0% 0% 3% 5% 7% 11% 15% 19% 24% 25% 25%
Core Parts 30% 30% 19% 21% 21% 20% 19% 18% 17% 17% 17%
Module Assembly 52% 52% 58% 54% 52% 49% 46% 44% 41% 41% 41%
A/S 18% 17% 20% 20% 20% 19% 20% 19% 18% 18% 17%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Balance sheet/Cash flow statement:
10 April 2023 14
Hyundai Mobis has had a net cash position since 2019, thanks to stable cash flow from
lucrative A/S business and the cash cow module assembly business. We expect
Hyundai Mobis to continue its net cash position and expect debt/equity to be
maintained at the single-digit level.
Hyundai Mobis has been enhancing its shareholder return policy through dividends,
buybacks, and cancellations. The company has said it will maintain its payout ratio of
20-30% based on net profit excluding the equity method. Hyundai Mobis has already
carried out share buybacks worth W1tr as a 3-year buyback program during 2019-21. In
2023E, the company plans another share buyback of W150bn and to cancel the same
amount.
Exhibit 29: Hyundai Mobis - Consolidated balance sheet

Consolidated balance sheet (W bn)
Total current assets 15,925 18,263 18,218 19,720 21,505 22,903 23,552 25,660 26,562 27,163 27,873
Cash & equivalents 2,498 2,049 2,408 2,335 3,342 4,202 4,156 4,088 3,531 3,539 3,741
Accounts receivable 6,346 7,225 6,151 6,580 7,122 8,111 8,112 10,089 10,861 11,379 11,670
Inventory 2,562 2,830 2,690 2,763 3,034 3,057 4,275 5,267 5,645 5,874 6,013
Other current assets 2,566 3,441 4,023 8,042 8,007 7,532 7,009 6,215 6,526 6,371 6,449
Total long-term assets 21,850 23,448 23,519 23,351 25,101 25,595 27,930 29,747 32,765 35,654 38,534
PP&E 7,947 8,516 8,206 8,030 8,605 8,721 9,131 9,371 11,023 12,359 13,619
Intangible assets 931 961 957 931 914 881 916 965 1,053 1,143 1,232
Investment assets 12,784 13,777 14,134 14,116 14,632 15,095 16,554 18,083 19,294 20,687 22,144
Other long-term assets 188 194 221 274 950 897 1,330 1,329 1,395 1,465 1,538
Total assets 37,775 41,712 41,737 43,071 46,606 48,498 51,483 55,407 59,328 62,816 66,407
Total current liabilities 8,291 8,833 7,893 8,242 8,962 10,082 10,077 11,476 11,931 12,013 11,955
Accounts payable 5,623 6,319 5,341 5,510 6,014 6,475 6,818 8,144 8,727 9,082 9,297
Short-term debt 1,969 1,644 1,746 1,642 1,593 1,940 1,676 1,884 1,610 1,337 1,064
Other current liabilities 698 870 806 1,090 1,356 1,667 1,583 1,449 1,594 1,594 1,594
Total long-term liabilities 3,808 4,320 4,485 4,126 5,234 5,087 6,048 6,123 7,527 8,407 9,468
Long-term debt 1,305 1,667 1,320 1,059 1,153 1,136 1,588 1,463 1,788 2,114 2,380
Other long-term liabilities 2,500 2,653 3,164 3,066 3,825 3,738 4,212 4,363 5,442 5,996 6,791
Total liabilities 12,099 13,154 12,378 12,368 14,196 15,170 16,125 17,599 19,459 20,419 21,423
Total common equity 25,622 28,494 29,295 30,630 32,330 33,253 35,273 37,799 39,858 42,385 44,970
Minority interest 54 63 64 73 80 75 84 8 10 12 14
Total shareholder's equity 25,676 28,558 29,359 30,703 32,410 33,328 35,357 37,808 39,869 42,397 44,984
Total Liability and Equity 37,775 41,712 41,737 43,071 46,606 48,498 51,483 55,407 59,328 62,816 66,407
(BS analysis)
ROE 12.5% 11.2% 5.4% 6.3% 7.3% 4.7% 6.8% 6.8% 6.9% 7.6% 7.5%
2aeb9e8b174644998c7303f5a989d953
Net margin 8% 8% 4% 5% 6% 4% 6% 5% 5% 5% 5%
ROA 93.7% 96.3% 84.2% 82.9% 84.9% 77.0% 83.4% 97.1% 97.4% 95.9% 92.9%
Leverage 157% 147% 144% 141% 142% 145% 146% 146% 148% 148% 148%
Working capital 14,531 16,375 14,183 14,854 16,170 17,643 19,205 23,500 25,233 26,335 26,980
Net debt 777 1,262 659 366 -597 -1,127 -892 -742 -132 -87 -298
D/E ratio 13% 12% 10% 9% 8% 9% 9% 9% 9% 8% 8%
Net D/E ratio 3% 4% 2% 1% -2% -3% -3% -2% 0% 0% -1%
Equity ratio 68% 68% 70% 71% 70% 69% 69% 68% 67% 67% 68%
10 April 2023 15
Exhibit 30: Hyundai Mobis - Consolidated cash flow statement

Consolidated cash flow (W bn)
Cash flow from operations 4,352 2,018 1,949 1,610 2,644 2,477 2,609 2,154 2,990 3,219 3,636
Net income pre-preferred dividends 3,055 3,038 1,568 1,889 2,291 1,529 2,352 2,485 2,669 3,111 3,284
D&A add-back 541 646 710 714 821 856 837 898 1,231 998 1,142
Minorities interests add-back -15 9 -10 -1 4 -2 10 2 2 2 2
Equity method income -1,257 -1,090 -685 -393 -709 -378 -922 -1,222 -1,109 -1,261 -1,341
Net (inc)/dec working capital 445 -1,293 -463 -1,299 -502 -232 -454 -764 -566 -393 -214
- Net change in receivables -178 -894 823 -404 -445 -719 368 -1,985 -772 -518 -290
- Net change in inventories -210 -214 38 -90 -195 -93 -1,087 -870 -378 -229 -139
+ Net change in trade payables -160 852 -749 285 173 607 -517 1,189 584 354 215
Other operating cash flow 1,588 709 833 702 748 709 807 772 763 763 763
Cash flow from investments -4,949 -2,124 -1,066 -944 -720 -1,257 -1,953 -1,604 -3,074 -2,556 -2,609
Capital expenditure -4,135 -1,329 -724 -560 -828 -1,119 -954 -1,221 -2,971 -2,424 -2,492
Acquisitions/Divestures -1,262 -6 -23 -12 0 -527 -459 -224 0 0 0
Other investing cash flow 449 -789 -319 -372 108 390 -540 -159 -103 -131 -117
Cash flow from financing 170 -336 -396 -721 -972 -232 -962 -638 -473 -655 -825
Dividends paid (common & pref) -292 -332 -332 -332 -475 -282 -464 -368 -413 -584 -699
Common stock issuance (repurchase) 0 0 0 0 0 0 0 0 0 0 0
+ Inc/(dec) in ST debt -427 -514 -373 -630 -440 10 -791 -39 -273 -273 -273
+ Inc/(dec) in LT debt 910 509 294 242 359 377 825 146 326 326 266
+ Inc/(dec) in pref shares 0 0 0 0 0 0 0 0 0 0 0
Change in minority interest 0 0 0 0 0 0 0 0 0 0 0
Other financing cash flows 213 0 16 0 -94 -102 -104 -133 -113 -123 -118
Other cash flow 13 -6 -129 -18 55 -128 261 21 0 0 0
Total cash flow -414 -449 359 -73 1,007 860 -46 -68 -558 8 203
FCF 216 689 1,225 1,050 1,816 1,358 1,654 933 -84 663 1,028
Company overview and history
Hyundai Mobis was founded in 1977 as Hyundai Precision & Industries Corporation. In
the 1970s and 1980s, the company manufactured containers, railroad vehicles, and
aircraft. It was in the late 1980s that the company began investing in the automotive
business, which became its core business from the 1990s. The company was renamed
under the current name in 2000. Since then, Hyundai Mobis has been supplying full
2aeb9e8b174644998c7303f5a989d953
vehicle modules and assemblies as well as after service for Hyundai Motor and Kia,
followed by its next growth driver: EV-related module/components and assemblies.
Circular ownership
With ES Chung appointed as Chairman of Hyundai Motor Group in October 2020,
succeeding his father MK Chung, a corporate restructuring plan has been widely
discussed in the market as a natural next step to complete the leadership succession
and also as a potential solution to the group’s current circular ownership structure.
Hyundai Motor Group currently has circular shareholdings between its major
subsidiaries: Hyundai Motor Company-Kia-Hyundai Mobis, each being the largest
shareholder of another. On the other hand, for the major subsidiaries, the founding
family (MK Chung and ES Chung) only owns 7.9% of Hyundai Motor Company, 1.7% of
Kia, and 7.5% of Hyundai Mobis. While the current structure enables the owner family to
control major subsidiaries with small stakes, we believe the current ownership structure
could potentially expose the family to external risks, such as regulatory changes and
potentially management “interference” by third parties, as has been seen in the past.
10 April 2023 16
While the timing and method remain unknown, any potential corporate restructuring of
Hyundai Motor Group could help the HMG chairman to strengthen his control over the
group and limit “interference” from third parties by gaining an increased foothold in core
subsidiaries of the group, including Hyundai and Kia.
There are a variety of possible scenarios surrounding Hyundai Motor Group’s potential
restructuring plan. As the majority of the group’s subsidiaries are under Hyundai Motor
Company’s control, one potential scenario could be the owner family seeking to secure
as high a stake in Hyundai Mobis (the biggest shareholder of Hyundai Motor Company)
as possible, and thereby gaining stronger control over Hyundai Motor Company and
resolving circular ownership issues. We note that in March 2018, Hyundai Motor Group
sought to restructure its ownership, reform the circular ownership and reduce
regulatory risks, by making Hyundai Mobis a holding company. The plan involved
spinning off Hyundai Mobis’s cash cow after-sales and module business and merging
the business with Hyundai Glovis. The restructuring plan was halted following opposition
from investors.
While no such plan has been announced by the group since its earlier restructuring
attempt was halted in 2018, the potential governance risk from the circular ownership
structure has served as a discount factor for the Hyundai Mobis stock price, and we
believe Hyundai Motor Group’s unwinding of its complicated circular ownership through
group restructuring would be a valuation re-rating catalyst for Hyundai Mobis.
Exhibit 31: Complicated cross holding structure

Circular ownership (as of 2022 Year-end)
2aeb9e8b174644998c7303f5a989d953
Source: Company data, compiled by Goldman Sachs Global Investment Research
Investment Thesis, Price Target Risks and Methodology - Hyundai Mobis

Hyundai Mobis is Hyundai Motor Group’s largest tier 1 auto parts supplier. As a
subsidiary of Hyundai Motor Group, Hyundai Mobis supplies full vehicle modules and
10 April 2023 17
assemblies as well as after service (A/S) for Hyundai Motor Company and Kia. Plugged
into Hyundai and Kia’s aggressive EV ramp-up, the electrification business is set to be
the next growth driver for Hyundai Mobis. However, we are cautious on the outlook for
the electrification business as a large revenue contribution comes from the
pass-through battery cost. We expect earnings to remain sluggish, with the exception of
A/S business, due to large upfront investments in electrification and slow progress in
expanding sales to customers other than the Hyundai Motor Group. At the same time,
we see prospects for margin improvement along with Hyundai Motor Group EV sales
growth at Hyundai Mobis, which is actively investing in products that will support
Hyundai Motor Group’s electrification drive. We will be focusing on whether Mobis can
achieve meaningful margin recovery in electrification business over the next few years.
Hyundai Mobis’s 12m forward valuation multiples (P/E, P/B, and EV/EBITDA) do not
appear particularly demanding. We are Neutral rated.
We are Neutral rated on Hyundai Mobis, with our 12-month target price of W245,000
derived from P/B-ROE correlation based on 2023E results. Our P/B-ROE correlation
derives a target P/B of 0.63. We apply an additional 10% discount (historical average of
discrepancy between our derived target P/B and actual P/B) to derive our TP, which
results in W245,000. Risks include margin deterioration/improvement in electrification
business, larger- or slower-than-expected HMG volume recovery, and HMG unwinding of
circular ownership.
Price Target Risks and Methodology - Denso

Our SOTP-based 12-month target price of ¥9,000 is based on our FY3/24 estimates,
applying target P/E multiples to our operating profit estimates for the ICE (8X), EV/ADAS
(19X), and other (15X) businesses. Risks include lower-than-expected auto production
volume, larger-than-expected upfront investment, and yen appreciation.
2aeb9e8b174644998c7303f5a989d953
10 April 2023 18
Disclosure Appendix
Reg AC
We, Kee Ryung Kim, Kota Yuzawa and Hiroki Muramatsu, hereby certify that all of the views expressed in this report accurately reflect our personal
views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or
indirectly, related to the specific recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.
GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.
M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.
Quantum
Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.
Disclosures
Rating and pricing information
Denso (Buy, ¥7,273).
The rating(s) for Hyundai Mobis is/are relative to the other companies in its/their coverage universe: Hanon Systems, Hyundai Mobis, Hyundai
Motor Co., Kia Motors
2aeb9e8b174644998c7303f5a989d953
The rating(s) for Denso is/are relative to the other companies in its/their coverage universe: Aisin, Bridgestone, Denso, Hino Motors, Honda
Motor, Isuzu Motors, Mazda Motor, Mitsubishi Motors, Mitsui High-tec Inc., Nifco Inc., Nissan Motor, Subaru Corp., Sumitomo Metal Mining,
Sumitomo Rubber Industries, Suzuki Motor, TOYO TIRE, Toyota Boshoku, Toyota Motor, Unipres Corp., Yamaha Motor
Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies covered
by Goldman Sachs Global Investment Research and referred to in this research.
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Hyundai Mobis (W213,500)
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Hyundai Mobis (W213,500)
Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Denso (¥7,273)
Goldman Sachs had a non-securities services client relationship during the past 12 months with: Denso (¥7,273) and Hyundai Mobis (W213,500)
Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe
Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 47% 37% 16% 64% 58% 48%
As of January 1, 2023, Goldman Sachs Global Investment Research had investment ratings on 3,201 equity securities. Goldman Sachs assigns stocks
as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage universe and related definitions’ below. The Investment
Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.
10 April 2023 19
Price target and rating history chart(s)
Regulatory disclosures
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10 April 2023 20
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Hyundai Mobis (012330.KS)

012330.KS 12m Price Target: W245,000 Price: W213,500 Upside: 14.8%

growth at Hyundai Mobis, which is actively investing in products Multiple

that will support HMG’s electriﬁcation drive. Introduction of a

Source: Company data, Goldman Sachs Research estimates.

Hyundai Mobis (012330.KS) Income Statement (W bn) _________________________________

Capital expenditures (1,220.8) (2,971.1) (2,424.5) (2,491.6)

Repayment of lease liabilities -- -- -- --

Source: Company data, Goldman Sachs Research estimates.

AS Electrification Core Parts Module Assembly OPM% (RHS)

Toyota BEV Hyundai Group BEV

We expect margin improvement from volume recovery to be minimal this year

3,500 12.0% (W bn) (%, OPM)

(W bn) (k unit) (W bn) (k unit)

30,000 2,500 30,000 2,500

500 5,000 500

(W bn) (W bn) (OPM%)

30,000 600 2.0%

Considerable difference in earnings performance

Denso has edge in terms of product competitiveness

Accordingly, customer diversiﬁcation the main differentiator

Hyundai’s EV success is Mobis’s success

Toyota BEV Hyundai Group BEV Toyota BEV Toyota HEV+PHEV+FCV

Exhibit 21: Strength in E-GMP

Source: Company data, Goldman Sachs Global Investment Research

Valuation not demanding relative to historical levels

P/E +1 std -1 std Avg P/B +1 std -1 std Avg

Exhibit 25: EV/EBITDA trading broadly in line with historical average

EV/EBITDA +1 std -1 std -1 std

Source: Company data, Quantiwise, Goldman Sachs Global Investment Research

Margin improvement/deterioration in EV-related business

Larger-than-expected/smaller-than-expected HMG volume growth

Unwinding of circular ownership through group restructuring

We are below consensus

Exhibit 26: We are below consensus

Source: Bloomberg, Goldman Sachs Global Investment Research

Earnings projections and key ﬁnancials

Exhibit 27: Hyundai Mobis - Consolidated P/L

Source: Company data, Goldman Sachs Global Investment Research

Source: Company data, Goldman Sachs Global Investment Research

Balance sheet/Cash ﬂow statement:

Exhibit 29: Hyundai Mobis - Consolidated balance sheet

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 30: Hyundai Mobis - Consolidated cash ﬂow statement

Source: Company data, Goldman Sachs Global Investment Research

Company overview and history

Exhibit 31: Complicated cross holding structure

Source: Company data, compiled by Goldman Sachs Global Investment Research

Investment Thesis, Price Target Risks and Methodology - Hyundai Mobis

Price Target Risks and Methodology - Denso

Company-speciﬁc regulatory disclosures

Distribution of ratings/investment banking relationships

Rating Distribution Investment Banking Relationships

Price target and rating history chart(s)

Ratings, coverage universe and related deﬁnitions

Global product; distributing entities

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