1. Motonic’s H1 2025 Performance: A Mixed Bag

Motonic reported revenue of KRW 71.1 billion, operating profit of KRW 3.8 billion, and net profit of KRW 5.8 billion in H1 2025. While revenue slightly decreased year-over-year, both operating and net profits saw significant declines. However, the figures were better than market expectations at the time of the preliminary earnings release.

2. Positive Factors: Future Mobility Focus and Solid Financials

  • Future Mobility Initiatives: Development of FCEV and hybrid vehicle components secures future growth engines. Increasing sales proportion of electronic parts.
  • Strong Customer Base: Stable partnership with Hyundai Motor Group.
  • Reinforced Financial Health: Ample cash and cash equivalents, low debt-to-equity ratio.

3. Negative Factors: Profitability Decline and Increased Warranty Provisions

  • Profitability Decline: Operating profit margin at 5.92% and net profit margin at 9.15%, a significant drop year-over-year. Increased selling, general, and administrative expenses, especially warranty provisions, are the primary cause. Potential product quality issues or recalls need investigation.
  • Revenue Decline: Slight decrease compared to the same period last year.
  • High Customer Concentration: Dependence on Hyundai Motor Group presents a potential risk.

4. Investment Strategies: Short-Term Caution, Mid-to-Long-Term Growth Potential

Short-Term Strategy: A cautious approach is necessary, closely monitoring the resolution of profitability issues and cost efficiency efforts. Pay close attention to the reasons for increased warranty provisions.

Mid-to-Long-Term Strategy: Adjust investment weighting by comprehensively considering the performance of future mobility parts business, new customer acquisition, and profitability improvement trends.

5. Key Monitoring Points

  • Causes of increased warranty provisions and related cost estimates
  • Progress and expected revenue contribution of FCEV and hybrid parts business
  • Management’s concrete plans for cost structure improvement and profitability recovery