---
endpoint: analytics
pattern: Autos
status: done
latency_ms: 222085
conversation_id: 35eae422-d05d-454e-abcf-d971e94aed60
citations: 1
created: 2026-05-31 18:47:29Z
---

# How does Kia’s valuation compare to peers, and what justifies its premium/discount?

# Kia Corp (000270 KS) — Valuation vs. Peers and Justification of Multiple

## Headline take

Kia trades at a **structural ~10% PE discount to its parent affiliate Hyundai Motor (HMC, 005380 KS)** and at a **deep discount to global legacy OEM averages**, despite running the **highest operating margin in the entire global legacy OEM peer set**. CLSA frames the current sector-wide multiple compression as the market pricing in "existential risk" for legacy automakers, with HMC and Kia priced as if their double-digit OPMs are not sustainable — a view CLSA disputes. The latest May-2025 transfer-of-coverage note keeps Kia at **O-PF, TP ₩105,000 vs. ₩92,000 spot (≈14% upside)** [6].

---

## 1. Where Kia trades vs. peers (CLSA peer comp tables)

### 1.1 12-month forward PE and 2025 dividend yield (CLSA, Feb 2025) [3]

| Automaker | 12F P/E (x) | 2025F Div yield |
|---|---:|---:|
| Nissan | 15.0 | 1.4% |
| Toyota | 8.9 | 3.2% |
| Ford | 6.3 | 7.0% |
| Daimler | 6.1 | 7.0% |
| Subaru | 6.1 | 4.0% |
| Honda | 5.9 | 5.0% |
| BMW | 4.5 | 6.7% |
| Stellantis | 4.5 | 6.4% |
| GM | 3.8 | 1.0% |
| **HMC** | **3.8** | **7.9%** |
| VW | 3.8 | 7.0% |
| **Kia** | **3.7** | **2.0%** |

Kia trades at the **very bottom of the global OEM peer set** on PER (only fractionally below VW/HMC/GM and dramatically below Japan ex-Nissan). Including the announced year-end DPS not yet ex-dividend, CLSA puts Kia's actual cash-yield-at-risk at **6.7%** vs. consensus 12F PE of just **3.7x** — meaning the PE is literally **below the dividend yield**, a signal the market historically reserves for businesses whose payout it doubts [8].

### 1.2 Detailed multi-region peer-comp (CLSA, Jan 2025) [10]

| Company | 2025 PER | 2026 PER | 2025 PBR | 2025 ROE | 2025 EV/EBITDA |
|---|---:|---:|---:|---:|---:|
| Toyota | 10.4 | 9.8 | 1.1 | 11.7% | 12.2 |
| Honda | 7.1 | 6.7 | 0.5 | 7.8% | 6.6 |
| Suzuki | 10.2 | 9.8 | 1.2 | 12.9% | 4.3 |
| Subaru | 6.5 | 6.7 | 0.8 | 12.4% | 2.6 |
| Mazda | 4.7 | 4.7 | 0.4 | 8.4% | 0.9 |
| Mitsubishi | 5.8 | 6.0 | 0.7 | 12.8% | 2.0 |
| **Japan avg.** | **7.4** | **7.8** | **0.8** | **9.7%** | **6.3** |
| Ford | 5.8 | 5.5 | 0.8 | 13.7% | 2.3 |
| GM | 4.9 | 5.0 | 0.7 | 14.4% | 2.6 |
| **US ex-Tesla avg.** | **5.4** | **5.2** | **0.8** | **14.1%** | **2.4** |
| Tesla | 116.9 | 93.1 | 15.2 | 13.2% | 60.0 |
| Daimler | 5.8 | 5.4 | 0.5 | 9.2% | 0.9 |
| BMW | 6.1 | 5.6 | 0.5 | 8.8% | 3.3 |
| Volkswagen | 3.5 | 3.0 | 0.2 | 6.6% | n/a |
| Volvo AB | 10.9 | 10.0 | 2.7 | 25.0% | 5.3 |
| Renault | 4.3 | 3.9 | 0.4 | 8.8% | 0.8 |
| **Europe avg.** | **6.1** | **5.6** | **0.9** | **11.7%** | **2.6** |
| Great Wall | 7.5 | 6.7 | 1.2 | 16.6% | 7.1 |
| SAIC | 17.6 | 16.6 | 0.7 | 4.1% | 5.0 |
| Geely | 11.0 | 8.9 | 1.3 | 12.1% | 4.5 |
| **China avg.** | **12.9** | **10.9** | **0.7** | **7.5%** | **5.8** |
| Hyundai Motor | 5.7 | 5.0 | 0.5 | 9.3% | 7.2 |
| **Kia** | **4.5** | **4.4** | **0.6** | **13.9%** | **(0.6)** |
| **Korea avg.** | **5.1** | **4.7** | **0.6** | **11.6%** | **3.3** |
| **Global avg.** | **7.9** | **11.1** | **1.4** | **10.6%** | **7.5** |

CLSA's own EPS-based PER (4.5x on 2025) is slightly above consensus 3.7x because the broker sits ~20% below sell-side consensus on 2025 OP [8]. Either way, Kia trades **roughly half the global average** and **about a turn below HMC**.

---

## 2. The Kia vs. HMC discount — CLSA's formal framework

This is the single most important valuation lens for Kia given the affiliate structure. From the most recent Kia-specific note (30-Jan-2025) [1]:

> "We value Kia using one-year forward PE methodology... Our target multiple is **5.0x, a 17.5% discount to our HMC target multiple of 6.0x**. This is because **Kia PE multiple typically trades 10% at a discount relative to HMC**. **Recently the discount has widened** as HMC has a higher total shareholder return of **35% versus Kia of 30%**."

Two pieces to the discount:
- **Structural ~10%**: Persistent historical PE gap reflecting governance, free-float, and the perception that Kia is a controlled affiliate within Hyundai Motor Group (HMC owns 33.9% of Kia [5]).
- **Recent widening (~7.5pp on top of the structural 10%)**: Driven by **inferior total shareholder return policy** — Kia's 30% TSR commitment trails HMC's 35%. CLSA explicitly attributes the wider-than-historical discount to this gap, **not** to operating fundamentals [1][2].

HMC's own 6.0x target is set "in line with the higher end of the average multiple for the global legacy OEMs" because CLSA "see[s] no reason why Hyundai Motor should trade at a discount given better earning profile and BEV market share profile" [11]. By extension, Kia's 5.0x = HMC's 6.0x × (1 – 17.5%) — i.e., Kia inherits HMC's relative-to-global anchoring and then takes the affiliate haircut.

---

## 3. What justifies a *narrower* discount than the market is pricing (the bull case)

### 3.1 Best-in-class profitability — Kia leads the entire peer set on OPM [4]

| Automaker | 2025 OPM (consensus) | 2026 OPM (consensus) |
|---|---:|---:|
| **Kia** | **11.4%** | **11.1%** |
| Toyota | 9.6 | 9.0 |
| Tesla | 9.0 | 10.8 |
| HMC | 8.2 | 8.1 |
| BMW | 8.0 | 8.3 |
| Daimler | 7.8 | 8.2 |
| Subaru | 7.7 | 6.8 |
| GM | 7.7 | 7.2 |
| Honda | 6.9 | 6.7 |
| Stellantis | 6.5 | 7.4 |
| VW | 5.7 | 6.4 |
| Ford | 4.8 | 5.3 |
| Nissan | 2.0 | 2.6 |

Kia is the **#1 most profitable legacy OEM globally** on consensus 2025–26 — by ~180 bps over Toyota and ~320 bps over its parent HMC [4]. On a quality-of-earnings basis, this should warrant a *premium*, not a discount, multiple.

### 3.2 Highest ROE among Korean/Japanese peers — 13.9% in 2025E
Kia's ROE of 13.9% sits well above Toyota (11.7%), HMC (9.3%), Honda (7.8%), BMW (8.8%), VW (6.6%), and even Ford (13.7%) and GM (14.4%) on the US side, with much lower leverage [10].

### 3.3 Dividend yield + buyback cushion
Kia's announced ₩6,500 year-end DPS (pre ex-dividend on 13 March) implied a **6.7% dividend yield against a 3.7x consensus PE** — a relationship CLSA observes typically signals the market is "calling bluff on the yield or questioning the sustainability of a business" [7]. Layered on share buybacks, the total cash-return yield runs at the upper-single-digit level.

> "Kia having a much better return profile along with xEV market share versus its global peers, its **PE multiple at sub 5x offers good risk-reward**. In addition, its **+6% dividend yield is a further buffer**." — CLSA, 30 Jan 2025 [5]

### 3.4 Existential-risk framing — pure sentiment overhang
CLSA's framework: the sector is currently being priced for an existential outcome. "Given the dividend yield is based on announced numbers, the market appears to be pricing in **existential risk** for HMC & Kia... Yet, the **sector-wide discount has created an opportunity for select OEMs**" [9]. CLSA explicitly excludes Kia/HMC from the OEMs that "rightfully deserve a significant discount" because those are companies "showing signs of weak OPMs whether... due lacking capabilities in xEV or competition from China... HMC & Kia fall into neither of these categories."

---

## 4. What justifies the discount that *does* exist (the bear case)

1. **Lower TSR commitment vs. HMC** (30% vs. 35%) — directly explains the recent widening of the discount [1].
2. **US tariff exposure**. Kia's Q4 2025 earnings commentary confirmed 15% US tariffs took effect November 2025, dampening Q4 results and embedded into the 2026 guide (10.2 trillion KRW OP / 8.3% margin guide despite tariff and higher incentives).
3. **High net cash drag** — Kia holds ~**₩20 trillion in net cash** [13], not unreasonable vs. peer groups per management's own framing but historically Korean autos have been penalized for low capital efficiency on balance sheet cash. Management acknowledges this opens the door to TSR upgrades.
4. **Affiliate/governance discount** — the structural ~10% gap to HMC has persisted across cycles, suggesting a market-imposed permanence to the corporate-structure haircut.
5. **Peak-OPM concern**. Consensus expects 11.4% → 11.1% OPM compression in 2025–26, and the market is extrapolating further normalization toward a global ~7% mean [4]. This is the "peak-out" worry CLSA acknowledges but disputes [11].
6. **Competitive xEV landscape** — Chinese EV pricing aggression and softer-than-expected mass-market EV uptake in the US/Europe weighs on multiple expansion for all legacy OEMs [11].
7. **Low absolute dividend yield ranking on consensus** — Kia's 2.0% 2025F dividend yield in the comp table [3] (versus HMC at 7.9% in the same table) reflects CLSA's *prospective* dividend (lower DPS payout ratio than HMC), which is a key reason for the multiple gap relative to HMC despite better margins.

---

## 5. CLSA's current ratings & price targets (May 2025 transfer of coverage) [6]

| Company | Ticker | Rating | Current price | Target price | Implied upside |
|---|---|---|---:|---:|---:|
| Hyundai Motor | 005380 KS | O-PF | ₩193,800 | ₩250,000 | +29% |
| **Kia** | **000270 KS** | **O-PF** | **₩92,000** | **₩105,000** | **+14%** |
| Hyundai Mobis | 012330 KS | O-PF | ₩255,000 | ₩300,000 | +18% |
| HL Mando | 204320 KS | HC O-PF | ₩36,100 | ₩51,000 | +41% |
| Hyundai Wia | 011210 KS | HLD | ₩42,250 | ₩43,000 | +2% |
| Hanon Systems | 018880 KS | HLD | ₩3,460 | ₩4,000 | +16% |
| Hankook Tire | 161390 KS | HLD | ₩40,150 | ₩40,000 | -0% |
| Nexen Tire | 002350 KS | O-PF | ₩5,860 | ₩6,200 | +6% |

CLSA's earlier Jan 2025 sector view targeted Kia at ₩120,000 with EPS estimates of ₩4,903/₩5,407/₩6,221 for 2023E/2024E/2025E [12], so the May-2025 TP cut to ₩105,000 reflects a higher tariff drag and lower 2025–26 OP path under new coverage. CLSA's total-return math (TP capital gain + buyback + DPS) gave Kia **~12% total return** vs. HMC ~26%, Mobis ~27%, Mando ~20% — confirming Kia is *not* CLSA's top pick within the group despite the cheapest absolute multiple, because the **upside-per-multiple-point** is greater in upstream parts names.

---

## 6. Synthesis — Premium or Discount, and why

**Kia trades at a deep discount, not a premium.**

The discount has three stacked layers:
1. **Sector-wide legacy OEM discount** (~6-8x global ex-Tesla average) for peak-margin and EV-disruption fears [11].
2. **Korean OEM bucket discount** (Korea avg 5.1x vs. Japan avg 7.4x and Europe avg 6.1x) [10] — reflecting governance / chaebol structure, FX exposure, and KOSPI risk premium.
3. **Kia-specific affiliate discount to HMC** (~17.5% on CLSA target multiples, vs. typical ~10%) driven by inferior TSR policy [1][2].

**The discount is *not* fundamentally justified on operating metrics** — Kia leads peers on OPM (11.4%) [4] and runs higher ROE (13.9%) than every Japanese OEM and its parent HMC [10]. CLSA's view is that the multiple is a sentiment/structural overhang that should compress over time, with the catalysts being: (a) a TSR policy upgrade to close the gap to HMC, (b) demonstration that the double-digit OPM is structurally sustainable rather than peaky, and (c) clearer evidence of BEV traction in 2026 with the EV2/EV4/EV5 mass-EV lineup completing [2].

The bull-case re-rating path: Kia's fair PE = HMC fair PE × (1 – 10% historical discount) = 6.0x × 0.9 = **~5.4x**, vs. current ~3.7x consensus. Closing that gap on flat earnings would imply ~45% upside, which is roughly what CLSA's combination of EPS revisions, TSR upgrades, and re-rating math points to over a 1–2 year horizon [9].

---

**Sources**

[1] Korea Autos — "Kia - O-PF (Double-digit OPM defended)" — CLSA, 30 Jan 2025 — 607949007LinqAlpha.PDF
[2] Korea Autos (PEs below dividend yields) — CLSA, 3 Feb 2025 — 607949551LinqAlpha.PDF
[3] Korea Autos (PEs below dividend yields), 12F PE & 2025 Div yield table (Fig. 4) — CLSA, 3 Feb 2025 — 607949551LinqAlpha.PDF
[4] Korea Autos (PEs below dividend yields), 2025/2026 OPM consensus table — CLSA, 3 Feb 2025 — 607949551LinqAlpha.PDF
[5] Kia - O-PF (Double-digit OPM defended), maintain rating commentary — CLSA, 30 Jan 2025 — 607949007LinqAlpha.PDF
[6] Korea autos (Transfer of coverage to Brian Lee), TP table — CLSA, 16 May 2025 — 607959723LinqAlpha.PDF
[7] Korea Autos, "The curious case of Korean autos part II" — CLSA, 3 Feb 2025 — 607949551LinqAlpha.PDF
[8] Korea Autos, HMC & Kia 12-month forward PEs below 2025 dividend yields — CLSA, 3 Feb 2025 — 607949551LinqAlpha.PDF
[9] Korea Autos, "Market pricing in existential risk for legacy OEMs" — CLSA, 3 Feb 2025 — 607949551LinqAlpha.PDF
[10] Korea Autos (2025 outlook: Playing the range; redux), Global autos peer comps table — CLSA, 4 Jan 2025 — 607947472LinqAlpha.PDF
[11] Korea Autos, Investment thesis Hyundai/Kia — CLSA, 3 Feb 2025 — 607949551LinqAlpha.PDF
[12] Korea Autos (2025 outlook), HMC/Kia/Mobis/Wia/Glovis EPS & target price table — CLSA, 4 Jan 2025 — 607947472LinqAlpha.PDF
[13] Kia Corporation, Q4 2025 Earnings Call — net cash position vs. peer comparison

## Citations

- [13] **Kia Corporation, Q4 2025** · external

