Hyundai Motor India Gets A Buy As Yes Securities Initiates Coverage; Sees 24% Upside

Yes Securities Report

We initiate coverage on Hyundai Motor India Ltd. with Buy (target price of Rs 2,194) at 24 times FY27E), valuing the stock at par with Maruti Suzuki India Ltd. Although Hyundai Motor India is aligned well with passenger vehicle segment trends, its growth has been capacity-constrained as reflected in lower domestic volume compound annual growth rate of ~9% (versus ~16% for industry) over FY21-24.

The GM plant acquisition will surely boost growth through vital capacity addition in phases. Besides leveraging the strong parentage of Hyundai Motor Corp, Hyundai Motor India is fast evolving in line with a dynamically changing tech landscape, which will slash lead times for new product development, make India franchise definitively robust, and help strengthen exports (~21% volume share in FY24).

Hyundai Motor India is likely to become a thriving export hub for Hyundai Motor Corp. Further, it has consistently launched/revamped models; Creta EV launch is slated for Q4 FY25.

We see the MPV segment as a portfolio gap, which means Hyundai Motor India can gainfully challenge the duopoly of Maruti Suzuki and Kia. Its impressive earnings should continue unabated; we estimate volumes / revenue /Ebitda/adjusted profit after tax CAGR of 8.2%/11.5%/15.1%/11.4% over FY25-27E.

We also expect healthy free cash flow of Rs 60/74 billion in FY26E/27E, implying FCF yield of 3-4%, return on equity of ~40% in FY27E, which is attractive.

We prefer Mahindra and Mahindra Ltd., TVS Motor India Ltd. followed by Hyundai Motor India among OEMs from our coverage universe.

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