Samsung Securities cites 25% share divergence and tariff talks influencing buyback plans ahead of South Korea-U.S. summit

Samsung Securities forecasted on the 27th that Hyundai Motor would increase the proportion of preferred share repurchases this year to narrow the divergence between common and preferred shares. It maintained its investment opinion of 'Buy' and target stock price of 285,000 Korean won. Hyundai Motor's stock price on the previous trading day was 252,500 Korean won.

Amid the upcoming South Korea-U.S. summit on the 29th, expectations for tariff negotiations between the two countries are growing. As expectations for a tariff agreement with the U.S. rise, the automotive sector, particularly completed vehicles, is showing signs of stock price recovery. Samsung Securities analyzed that if tariffs decrease from 25% to 15%, most companies' tariff costs would reduce by 40-50%.

Lim Eun-young, a researcher at Samsung Securities, explained, "Following the tariff agreement, preferred shares are leading due to expectations for Hyundai Motor's share buybacks and the government's separate taxation benefits for dividends."

Samsung Securities analyzed that Hyundai Motor's preferred shares have outperformed common shares, leaving 4% below their historical high. This is influenced by the combined effect of expanded share buyback proportions and expectations for the government's separate dividend taxation.

After the conclusion of South Korea-U.S. tariff negotiations, Hyundai Motor is expected to repurchase and potentially cancel its shares.

Researcher Lim explained, "Hyundai Motor announced a 4 trillion Korean won share buyback plan from this year 2024 to 2027. If tariff uncertainties are resolved, it is likely to start share buybacks from the end of this year."

She added, "Starting with this share buyback, the company plans to increase the proportion of preferred share purchases to narrow the divergence between common and preferred shares."

Previously, shares were repurchased based on market capitalization weight. Currently, the divergence between Hyundai Motor's preferred and common shares is 25%, leaving more room for preferred share growth.

Additionally, Hyundai Motor and Kia were evaluated for their appeal as dividend stocks. Researcher Lim analyzed, "Despite this year's underperformance due to tariffs, dividends are expected to remain at the same level as last year. If the separate taxation proposal for dividend income tax is implemented, dividend funds may concentrate on Hyundai Motor and Kia."

Hyundai Motor to Increase Preferred Share Repurchases