Hyundai Glovis’ Baa1 rating affirmed by Moody’s with positive outlook

Investing.com -- On February 24, 2025, Moody’s (NYSE:MCO) Ratings affirmed the Baa1 issuer rating of Hyundai Glovis (KS:086280) Co., Ltd., and revised the outlook from stable to positive. This change is driven by Moody’s expectation that Hyundai Glovis will maintain low debt leverage and improve profitability over the next 1-2 years, supported by steady demand from its group affiliates and its conservative financial management, according to Mic Kang, a Vice President and Senior Credit Officer at Moody’s Ratings.

Moody’s anticipates Hyundai Glovis’ operating margin to improve to 6.3%-6.5% in 2025-26 from 6.0%-6.2% in 2023-24. The company is expected to benefit from increased shipping rates for car exports of Hyundai Motor (KS:005380) Company (OTC:HYMLF) (A3 stable) and Kia Corporation (A3 stable). Moreover, a shift in Hyundai Glovis’ fleet mix towards long-term chartered vessels will reduce its charter expenses.

These positive expectations persist despite potential uncertainties over the US’ trade policy and global macro conditions, which could impact Hyundai Glovis’ operations.

Moody’s also projects Hyundai Glovis’ adjusted debt/EBITDA ratio to improve to 1.3x-1.4x in 2025-26 from around 1.5x in 2024. This improvement is expected due to solid operating performance and tight debt management, which will likely compensate for increases in lease liabilities and capital spending to expand its fleet and make other investments. The company’s large cash holdings of around KRW4.4 trillion as of 31 December 2024, in combination with this ratio, strongly position the company at the Baa1 rating category.

Hyundai Glovis’ adjusted debt, including lease liabilities, is expected to grow to around KRW4.8 trillion by the end of 2026, up from an estimated KRW4.1 trillion as of 31 December 2024.

The Baa1 rating of Hyundai Glovis continues to be supported by the company’s operational stability and close linkage with Hyundai Motor (OTC:HYMTF) Group, which comes from the large captive demand from the Group and limited exposure to market risks. However, this stability is balanced by customer concentration in the cyclical auto industry and exposure to the shipping business, which involves capital intensity and cyclicality.

In terms of environmental, social, and governance (ESG) factors, Hyundai Glovis faces environmental and social risks similar to its transportation peers. However, the company’s prudent financial management helps to offset potential regulatory scrutiny due to its organizational structure.

Moody’s could upgrade Hyundai Glovis’ rating if the company maintains its operational stability and solid financial profile, with its reported operating margin remaining above 6.0% and adjusted debt/EBITDA staying below 2.0x, while maintaining large cash holdings.

Conversely, Moody’s could revise Hyundai Glovis’ outlook back to stable from positive if the company’s profitability weakens or if it undertakes significant debt-funded investments, causing its reported operating margin to fall below 6.0% or its adjusted debt/EBITDA to exceed 2.0x while its cash holdings decrease significantly on a sustained basis. The outlook could also be revised to stable if Hyundai Motor’s and Kia’s ratings are downgraded to Baa1.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.