Hyundai Motor, Kia gets A- credit rating from S&P Global

Hyundai Motor Co. and Kia Corp. said on Thursday that S&P Global upgraded their credit ratings from BBB+ to A-, with a Stable outlook for both companies.

With this rating upgrade, Hyundai Motor and Kia have received an A credit rating from all three of the world’s major credit rating agencies this year, following A3 and A- upgrades from Moody’s Investors Service and Fitch Ratings respectively in February. 

S&P Global based the upgrade on Hyundai Motor's and Kia's stronger market position, which has led to solid profit and cash flow.

This follows three years of marked enhancement in profitability starting in 2021. This stems from market share gains, product mix improvements, and exchange rate tailwinds.

S&P Global forecasted that the two companies' balanced portfolio, including electric vehicle (EV) and hybrid models, will enable it to adapt to market changes during the electrification transition.

The agency expects Hyundai and Kia to continue achieving adjusted EBITDA margins of 12% to 13% in 2024 and 2025, following their margins of 10.5% and 13.1% in 2022 and 2023.

Hyundai Motor and Kia's net cash positions have also improved significantly, rising from 16 trillion won in 2022 to 25 trillion won in 2023, according to S&P's figures.

The agency cited these high cash levels as a key reason for the credit rating upgrades, suggesting that both companies are well-prepared to navigate potential risks.

S&P Global forecasts that Hyundai and Kia will generate around 13 trillion won in free operating cash flow annually in 2024 and 2025, with positive discretionary cash flow even after accounting for shareholder returns.

Both companies are expected to maintain robust profitability over the next 12-24 months, thanks to their diversified portfolios that include electric and hybrid vehicles.

Write to Jin-Won Kim at jin1@hankyung.com