Hyundai Motor India has established a strong franchise in India; however the lack of major launches, including key growth driver historically in passenger vehicle segment, over the next 12 to 18 months, combined with a muted 5% capacity CAGR, higher royalty feels, and lower treasury income are likely to restrict the earnings per share (EPS) growth, Emkay said.

Shares of Hyundai Motor India Ltd. are trading with losses of over 4% on Tuesday, October 22, extending their decline after listing at a discount of over 1% to the issue price.

Brokerage firm Emkay has initiated coverage on Hyundai Motor India with a price target of ₹1,750 per share. The price target ascribed by Emkay implies a further downside of 11% from its IPO price of ₹1,960 per share.

"We initiate coverage on Hyundai Motor India (HMIL) with reduce (target price of ₹1,750, at 23x core Sep-26E PER, similar to MSIL) amid a lackluster 5% EPS CAGR over FY24-27E," it said.

The South Korean automaker has established a strong franchise in India; however the lack of major launches, including key growth driver historically in passenger vehicle segment, over the next 12 to 18 months, combined with a muted 5% capacity CAGR, higher royalty feels, and lower treasury income are likely to restrict the earnings per share (EPS) growth.

Similarly, Maruti Suzuki India Ltd (rated as a 'Reduce') is facing similar near-term growth challenges. However, Emkay favors it over Hyundai Motor India given its catch-up on operational and financial metrics, despite a lower SUV mix.

Maruti offers a more diversified product and powertrain range, along with higher growth potential through factors like a possible small-car recovery, an aggressive 8% capacity growth, a 7-seater SUV launch in H2FY26, and 10 new models by 2030, leading to a superior 6% and 10% revenue and EPS growth forecast for FY24-27.

Nomura highlighted Hyundai Motor India's focus on style and technology, noting that ongoing premiumisation is expected to drive high-quality growth.

The brokerage estimates Hyundai Motor India will deliver a 8% compound annual growth rate (CAGR) in volume over FY25-27, driven by 7-8 new models, including facelifts.

Additionally, it expects the company's EBITDA margins to improve from 13.1% in FY24 to 14% by FY27. This improvement will be driven by a better product mix, cost-cutting measures, and increased operational efficiency.

Overall, Nomura forecasts a 17% earnings CAGR for Hyundai Motor India over FY25-27.

Meanwhile, Macquarie believes that Hyundai Motor India should trade at a higher price-to-earnings (PE) multiple compared to its peers, owing to its favourable portfolio mix and premium positioning.

The brokerage sees medium-term benefits from Hyundai’s powertrain options, supported by its parent company's capabilities, and potential market share gains from new model and powertrain launches.

Hyundai Motor India sold its shares in a fixed price band of ₹1,865-1,960 for its mega ₹27,870-crore IPO, which surpassed LIC's initial share sale of ₹21,000 crore to become the biggest ever.

Hyundai Motor India is the second-largest OEM and the second-largest exporter of passenger vehicles and has a domestic market share of 14.6%.

For the month of September, Hyundai sold 64,201 units, a decline of 10% on a year-on-year basis. For 2024 till now, the company has sold 5.77 lakh units, which is flat compared to last year.

Source: cnbctv18