J.P. Morgan favors high-quality Korean leaders in autos, ESS batteries, and nuclear EPC

Overview

This report is J.P. Morgan’s summary of its coverage of Korean auto, battery, and nuclear EPC/utility companies. It discusses OEMs, auto parts, ADAS/robotics, batteries/ESS, lithium materials, nuclear EPC, and electric utilities, with the core conclusion that investors should select leading companies with clearer earnings trends, policy tailwinds, order visibility, and valuation frameworks.

Core views

In autos, HMC and Kia are identified as top picks, with the report arguing that the divergence between earnings and share prices is likely to converge, and using an SOTP approach that incorporates traditional auto operations, ADAS capabilities, and the value of Hyundai Motor Group’s stake in the robotics business. In batteries, US ESS is viewed as the most visible growth area for the Korean battery supply chain, with SDI and L&F ranked highest. In nuclear EPC, the report emphasizes global power demand, the cost advantage of nuclear systems, Korea’s execution record in the UAE project, and future order opportunities in large nuclear and SMR projects, with Doosan Enerbility listed as the Top pick.

Analysis framework

The report uses frameworks including coverage-table valuation, P/B and ROE, global peers, SOTP, industry demand and inventory/incentive tracking, ESS supply-demand and policy analysis, lithium price forecasts, nuclear project pipelines, LCOE, and order calculations, linking company ratings with industry themes.

Methodology notes

• Valuation methodSOTP

  Sum-of-the-parts valuation

  HMC and Kia target prices use the SOTP method, valuing auto operations at 2027E P/E multiples and including the value of Hyundai Motor Group’s stake in the robotics business, while also applying a 30% holding company discount.

• Relative valuationP/E, P/B, ROE, EV/EBITDA

  Multi-metric comparable-company valuation

  The report presents P/E, P/B, ROE, margins, and EV/EBITDA by groups including OEMs, batteries, nuclear EPC, and utilities to compare earnings quality, growth, and valuation premiums.

• Scenario analysisBull-bear analysis and holding discount

  Robotics business valuation scenario

  The value of HMC’s and Kia’s stakes in the robotics business uses the midpoint of bull-bear analysis and includes a holding company discount in valuation to reflect uncertainty around the new business.

• Industry economicsLCOE and system cost

  Nuclear cost competitiveness

  The nuclear section compares the economics of large nuclear and SMR versus other power sources based on system cost, carbon cost, capital cost, and long-term operating assumptions.

• Supply-demand forecastTop-down assumptions

  Demand forecasting for autos, batteries, and nuclear

  The report combines US auto demand, incentives, and inventory trends, ESS supply-demand, imports, and policy changes, as well as global power demand and nuclear project timelines, to form the industry outlook.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• HMC and Kia

  Core exposure to Korean OEMs, ADAS, and robotics optionality

  Strengths

  There is room for convergence between earnings trends and share-price performance; valuation uses SOTP and includes the value of stakes in the robotics business; both HMC and Kia are OW.

  Weaknesses

  Auto demand is affected by the macro environment, US incentives, and the inventory cycle, while the value of ADAS and robotics still depends on R&D and commercialization progress.

  Comparison

  HMC target price is W670,000 and Kia target price is W240,000; Kia has a lower P/E while HMC has higher robotics stake value.

  Risks

  Macro uncertainty suppressing volumes, delays in ADAS development milestones, and setbacks to HMG’s robotics development and manufacturing plans.

• Hyundai Autoever, Hyundai Mobis, HL Mando

  Exposure to auto parts, software-defined vehicles, and robotics actuators

  Strengths

  Beneficiaries of the SDV transition, increasing electronics content in parts, and potential growth in the robotics actuator market.

  Weaknesses

  R&D expenses, margin pressure, and valuation digestion pressure are more evident, with ratings ranging from N to UW.

  Comparison

  Autoever and Mobis are N, while HL Mando is UW, ranking behind HMC and Kia.

  Risks

  R&D investment failing to convert into profits, order ramp slower than expected, and weaker auto demand.

• Samsung SDI and L&F

  More constructive positioning within the Korean battery and materials chain

  Strengths

  US ESS demand, tariffs, and tax credits change economics in favor of US-local battery cells and non-China supply chains; both SDI and L&F are OW.

  Weaknesses

  There is still uncertainty around battery demand recovery, capacity utilization, and the path of lithium prices.

  Comparison

  SDI ranks first and L&F second in the battery preference order, both ahead of POSCO, EBM, and PFM.

  Risks

  ESS order execution, US policy changes, lithium price forecast errors, and capacity ramp-up falling short of expectations.

• Ecopro BM, POSCO Future M, and POSCO

  Exposure to cathode materials, lithium, and upstream resources

  Strengths

  POSCO has optionality through its lithium business and resource footprint, and the materials chain may benefit from a recovery in battery demand.

  Weaknesses

  Some materials companies have high valuations and weaker earnings visibility, and POSCO Future M is rated UW.

  Comparison

  POSCO is N, Ecopro BM is N, and POSCO Future M is UW, ranking below SDI and L&F.

  Risks

  Lithium project execution risk, materials price volatility, and customer demand recovering more slowly than expected.

• Doosan Enerbility, Hyundai E&C, KEPCO E&C, and KEPCO

  Exposure to nuclear EPC, engineering design, construction, and utilities

  Strengths

  Global power demand growth, nuclear system cost advantages, Korea’s execution record in the UAE project, and potential order pipelines support EPC companies.

  Weaknesses

  Nuclear projects have long cycles, and bidding and construction progress are uncertain; KEPCO is constrained by electricity pricing and cost pass-through.

  Comparison

  Doosan Enerbility is the Top pick, Hyundai E&C and KEPCO E&C are OW, and KEPCO is UW.

  Risks

  Project delays, cost overruns, insufficient decline in SMR costs, and policy or electricity price adjustments falling short of expectations.

• Hyundai Motor Group robotics business and the NVIDIA ecosystem

  Medium- to long-term optional growth source in HMC and Kia valuation

  Strengths

  The report discusses the NVIDIA Omniverse, Cosmos, Alphamayo, GR00T N1, Isaac Sim, Jetson, and Blackwell GPU ecosystem, arguing that the partnership can strengthen ADAS and robotics training capabilities.

  Weaknesses

  The commercialization path and scaled manufacturing remain at an early stage, and valuation depends on scenario assumptions.

  Comparison

  HMC valuation includes about W14tn for its 28% stake and Kia includes about W8tn for its 17% stake, both after a 30% holding company discount.

  Risks

  Model training, data, supply chain, manufacturing yield, and customer demand may all come in below expectations.

Key data

• Auto preference orderHMC(OW)=Kia(OW)>Autoever(N)>Mobis(N)>Mando(UW)The report lists HMC and Kia as the top picks in its auto coverage.
• Battery preference orderSDI(OW)>L&F(OW)>POSCO(N)>EBM(N)>PFM(UW)The report views US ESS as the clearest growth area in the Korean battery supply chain.
• Nuclear and utility preference orderDoosan Enerbility(Top pick)>Hyundai E&C(OW)>KEPCO E&C(OW)>KEPCO(UW)Doosan Enerbility is listed as the Top pick in nuclear EPC.
• HMC target priceW670,000The Dec-26 target price is based on SOTP, valuing the auto business at 11x 2027E P/E and including about W14tn for its 28% stake in the robotics business.
• Kia target priceW240,000The Dec-26 target price is based on SOTP, valuing the auto business at 9x 2027E P/E and including about W8tn for its 17% stake in the robotics business.
• HMG compute base50,000 NVIDIA Blackwell B100 GPUs, about 100 EFLOPSThe report treats this as the computing foundation for large-scale ADAS training.
• Driving data training estimateTesla 4.5bn miles of data would require about 1,296 days, or about 3.6 yearsThe estimate is based on approximately 2.49 EFLOPs per mile and a total training compute requirement of about 11,200 YFLOPS.
• SDI coverage table006400 KS: price W482,500, target price W770,000, rating OWSDI ranks first in the battery preference order.
• L&F coverage table066970 KQ: price W107,100, target price W290,000, rating OWL&F is rated OW within the battery materials chain.
• Doosan Enerbility coverage table034020 KS: price W87,800, target price W160,000, rating OWThe report lists it as the Top pick in nuclear.
• KEPCO E&C coverage table052690 KS: price W106,600, target price W260,000, rating OWIt benefits from nuclear engineering design and order opportunities.
• SMR cost assumptions40-year useful life, 7% cost of capital, 4-year construction periodThe report uses these assumptions to compare SMR cost positioning versus other power sources.

Impact & implications

For investors, the report supports taking structural positions within Korean autos, batteries, and the nuclear chain rather than simply buying the whole sector. More attractive areas are concentrated in HMC/Kia’s earnings recovery and robotics optionality, SDI and L&F’s ESS and materials opportunities, and Doosan Enerbility and KEPCO E&C’s nuclear order leverage; relatively cautious areas include some auto parts, materials companies with higher valuations or lower earnings visibility, and KEPCO, which is constrained by electricity pricing and policy.

Risks

• Macro uncertainty may weigh on auto sales and earnings.
• Key ADAS development milestones may be delayed.
• Hyundai Motor Group’s robotics development and manufacturing plans may face setbacks.
• Changes in US ESS demand, tariffs, tax credits, or localization policies may affect battery-chain profitability.
• There are forecast errors and execution risks around lithium prices and lithium projects.
• Nuclear and SMR projects may face delayed bidding, construction delays, cost overruns, or competitive pressure from diversified designs.
• KEPCO earnings are affected by electricity prices, fuel costs, and policy regulation; insufficient tariff adjustments would pressure earnings recovery.

What to watch

• HMC/Kia incentives, inventory days, HEV/EV mix, and quarterly operating profit trends in the US.
• HMC/Kia market share in Western Europe, Korea, and India, as well as new model launch cadence.
• ADAS development milestones, progress in partnerships with NVIDIA and Google, and commercialization and manufacturing progress in the robotics business.
• US ESS battery supply and demand, non-China LFP cathode demand, Korean battery import trends, and Korean government ESS centralized procurement tenders.
• Lithium prices, lithium capacity, and contributions from projects such as Mt Marion and Wodgina to POSCO earnings.
• Timelines for large nuclear and SMR projects, order wins by Korean EPC companies, and international replication of UAE project experience.
• The impact of nuclear LCOE, the magnitude of SMR capex decline, the 7% cost-of-capital assumption, and power demand growth on valuation.