Hanon Systems’ Shares Slump on Concerns About U.S. Auto Industry Strikes

By Kwanwoo Jun

Hanon Systems’ shares fell sharply on concerns about its heavy exposure to the strike-hit U.S. auto industry and rising operating costs.
Shares of the South Korean car-parts supplier for U.S. and other global auto makers slumped 15% to close Friday at 7,820 won ($5.80), the steepest daily percentage decline since Sep. 18, 2000, according to FactSet.

The benchmark Kospi ended the day 1.0% lower.
Citigroup analyst Paul Hwang said he expects Hanon Systems to suffer from weak revenue from U.S. original equipment manufacturers in the short term due to the crippling labor unrest by the United Auto Workers since September, as they account for 60% of the company’s U.S. revenue and 26% of its global revenue.
Hwang said the firm’s U.S. revenue growth could slow to 4% in the third quarter and 3% in the fourth, from 18% in the second quarter.
Hanon Systems is also facing a risk to its earnings from higher costs for labor as well as raw materials and other parts, according to Nomura analysts Angela Hong and Akash Gupta.
The expansion of the company’s margins will be limited, the Nomura analysts said in a research note. They added that Hanon would find it difficult to pass on higher costs to its auto maker clients, which are also struggling with weaker-than-expected sales of electric vehicles.
Nomura maintained its reduce rating on Hanon Systems and cut the stock’s target price by 13% to KRW7,000.
Write to Kwanwoo Jun at [email protected]