Analysts' bullish calls offset Hyundai Motor India weak debut; stock up 6%

The uptick in Hyundai Motor India's stock price follows the initiation of coverage with a bullish outlook by brokerage houses, including Motilal Oswal and Nomura

Shares of automaker Hyundai Motor India (HMIL) staged a strong recovery on Wednesday, surging 5.83 per cent to hit the intra-day high of Rs 1,928.90 on the NSE, after a lackluster debut on Tuesday, October 22, 2024.  A combined nearly 0.70 million shares of HMIL worth an estimated Rs 1,327.97 crore have exchanged hands on BSE and NSE today. 

 

Earlier, on Tuesday, October 22, the company’s shares listed at Rs 1,934, a discount of 1.31 per cent against the IPO issue price of Rs 1,960.

 

  The uptick in HMIL's stock price follows the initiation of coverage with a bullish outlook by brokerage houses, including Motilal Oswal and Nomura. Analysts at these brokerage firms remain bullish on Hyundai Motor India’s stock and have assigned a 'Buy' rating to the company’s shares, citing strong fundamentals.

 

Here’s what the brokerages have said about Hyundai Motor India stock:

 

Motilal Oswal Financial Services 

Analysts at Motilal Oswal remain bullish on Hyundai Motor India and have initiated coverage with a 'Buy' rating on the stock and a target price of Rs 2,345, premised on 27x September 2026E earnings (vs. 26x for MSIL). 

 

"Despite one-off gains, the company has enough operational levers to pull: utilisation levels are comfortable and could go higher, SG&A investments are now behind, and subcontracting costs (thanks to the healthcare deal ramp-up) are bound to come down," the analysts said.

 

They also pointed out that HMI receives extensive support from its parent, Hyundai Motor Company (HMC), in management, R&D, design, and supply chain. HMC’s strengths in emerging mobility domains can be effectively leveraged for the Indian market, which is one of HMI’s core advantages. They anticipate the company to report a 17 per cent EPS CAGR over FY25-27.

 

"We ascribe a slight premium to HMI over Maruti Suzuki (MSIL), given HMC’s technological prowess, superior financial metrics, premium brand perception, and alignment with industry trends," the analysts said.

 

Nomura on Hyundai Motor India stock

Brokerage firm Nomura also initiated coverage on the automaker's stock with a 'Buy' rating and a target price of Rs 2,472 based on FY27F EPS. In a research note, Nomura forecast HMI to deliver an 8 per cent volume CAGR over FY25-27F, driven by 7-8 new models (including facelifts) and EBITDA margins improving to 14 per cent by FY27F from 13.1 per cent in FY24.

 

"We believe this will be led by an improved product mix, cost reduction, and operating leverage. Overall, we estimate HMI to deliver a 17 per cent earnings CAGR over FY25-27F," Nomura said.

 

Given HMIL’s strong growth and high ROE of 42 per cent (FY27F), the brokerage estimates HMI to trade at 25x FY27F EPS, at the higher end of its expected trading band of 20-25x.

 

Key catalysts, according to Nomura, are capacity expansion in 2HCY25 (a 30 per cent increase by 2028F) and the launch of several new models (including four EVs) over the next 3-4 years.

 

However, Nomura cautioned that given its focus on profitable growth, HMI may face near-term market share risks as other OEMs increase discounts. "Model sharing with Kia India (unlisted) could also impact HMI's market share. It will need to raise its EV mix to meet CAFE-3 (Corporate Average Fuel Efficiency) norms," Nomura added.