Hyundai Mobis struggles with one-off costs in Q1 2023

Despite setbacks, analysts see these investments as key to Q2 rebound.

S.Korean auto parts maker Hyundai Mobis hits lower-than-expected profit for the first quarter of 2023 according to CGS-CIMB Securities.

The company reported an operating profit of 418 billion won ($313 million USD), due to its 170 billion won ($127m USD) one-off costs, consisting of quality cost provision, incentives for workers, cost adjustments for its BSA business, and severance pay for some of its employees.

The company's operating profit, without factoring in the one-off costs, amounted to 589 billion won ($441m USD). This still falls short of analysts' expectations by 3.5% due to weaker margins in the auto parts division.

Despite these setbacks, the company's after-service (A/S) division reported positive numbers during the first quarter, with a 2.3%-point YoY increase in operating profit margin (OPM), credited to lower shipping costs and higher demand for services.

CGS-CIMB expects Hyundai Mobis A/S division to continue to do well in the future, with an estimated OPM of 21.9% for the fiscal year 2023.

The company's auto parts division, which includes electrification, core parts, and modules, had higher revenue from electric car parts, but it is still not making a profit due to R&D and depreciation costs. This unit is expected to start making a profit again in the second quarter of 2023 as the auto parts division transitions to include EV parts to meet global demand.

Despite the disappointing earnings report, analysts remain positive about Hyundai Mobis's future. It sees the one-off costs as a temporary setback and believes that the A/S division will be key to the company’s second-quarter rebound, while its auto parts division is expected to grow as it transitions to include more electric car parts.  

Although Hyundai Mobis experienced a temporary setback, the company is in a favorable position to take advantage of the global shift towards electric vehicles, making it a promising investment opportunity for those seeking to capitalize on this trend.