Balanced Performance Growth across Steel and Energy Sectors
Clear Profitability Driven by High-Margin Items
Debt Ratio Improved through Real Estate Asset Securitization
Trade Finance-Oriented Borrowings Ease Repayment Burdens
Major Korean credit rating agencies have recently upgraded their credit outlooks for Hyundai Corporation (HC) to ‘Positive’ all at once. This move is interpreted as a reflection of the market’s favorable assessment of HC’s performance growth across all trading sectors, enhanced profitability, and the strengthening of its financial soundness through asset restructuring.
According to industry sources, Korea Ratings and NICE Investors Service adjusted the outlook for HC’s long-term credit rating from ‘Stable’ to ‘Positive’ on May 19 and 23, respectively. While the rating itself remains at ‘A’, the agencies have placed more weight on a potential upgrade in the near future. Korea Ratings also raised the outlook for HC’s holding company, Hyundai Corporation Holdings, to ‘Positive’ with an ‘A-’ rating.
The upgrade in HC’s credit outlook is attributed to the balanced improvement in business results across its traditional flagship sectors, including steel, petroleum and chemical products, and commercial energy & auto parts. In particular, the commercial energy & auto parts sector recorded an operating profit of KRW 34.8 billion last year and KRW 10.4 billion in the first quarter of this year, bolstered by increasing exports of high-margin products such as transformers. Consequently, the consolidated operating profit margin rose from 1.5% in 2023 to 2.0% in the first quarter of 2025.
Furthermore, HC successfully securitized approximately KRW 400 billion worth of assets through the liquidation of real estate funds and conversion into REITs, leading to a simultaneous reduction in debt and capital expansion. As a result, the debt-to-equity ratio dropped to 214.7% as of last year. Of the KRW 784 billion in total debt as of the first quarter of this year, more than 75% consists of short-term trade finance, which is assessed to pose a minimal repayment risk.
Looking ahead, HC plans to invest approximately KRW 100 billion in new businesses, including the potential acquisition of stakes in auto parts manufacturers. However, the impact on its financial soundness is expected to be limited, given its low fixed investment burden, stable dividend income, and internal cash-generating capabilities.
The two rating agencies proposed maintaining an EBITDA-to-interest expense ratio of 5x or higher as a prerequisite for a rating upgrade. Since HC has already shown significant improvement in this indicator—rising from 2.0x in 2020 to 4.2x in the first quarter of 2025—the possibility of a credit rating upgrade is expected to increase if the current trend continues.
May 23, 2025
NEWSIS