Buy Hyundai Motor India, target price Rs 2,345: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a buy call on Hyundai Motor India with a target price of Rs 2345.0. The current market price of Hyundai Motor India is Rs 1845.5.

Hyundai Motor India (HMI) has a diverse portfolio of 13 PV models that cover all major segments, including sedans (14% of volumes), hatchbacks (23% of volumes), and SUVs (63% of volumes), accounting for up to ~87% of India's total PV addressable market for FY24. The company also has a presence across all fuel types, including petrol, diesel, CNG, and Electric Vehicles (EVs). HMI appears to be well-aligned with the evolving industry trends in India. Its UV mix has notably improved to 63% in FY24 from 13% in FY16, while the overall industry UV mix has risen to 60% in FY24 from 21% in FY16. Thus, HMI is well positioned for future growth.

On the back of its parent support, Hyundai Motor is currently India's second-largest exporter of PVs, serving over 150 countries across Latin America, Africa, the Middle East, Asia, and beyond. In the past couple of years, HMI?s export revenue has registered a 25% CAGR vs. overall revenue CAGR of 21%.


Investment Rationale
While FY25 is likely to be a moderate year for PVs in India and consequently for Hyundai Motor India, Motilal Oswal projects that the company will report an 8% volume CAGR over the next two years. Following a moderation in FY25E earnings, they expect HMI to post 17% earnings CAGR over FY25-27E.

When comparing HMI with Maruti Suzuki, which is its closest peer, Motilal Oswal believes that while both OEMs are very close in competency and future growth potential, they can ascribe a slight premium to Hyundai Motor India over Maruti Suzuki, given: that Hyundai Motor Company's technological prowess in emerging technologies that can be customized to meet Indian customer requirements as needed. Also, they have superior financial metrics; a relatively premium brand perception; and better alignment with industry trends.

Motilal Oswal Financial Services has assigned a 27x one-year Fwd PER multiple to HMI, relative to the target multiple of 26x currently assigned to Maruti Suzuki. Therefore, they have arrive at the target price of Rs 2,345 for Hyundai Motor India, based on 27x Sep?26E earnings. The brokerage has initiated a coverage on HMI with a BUY rating.