Hyundai Motor India Receives 'Outperform' Rating With Target Price Hike From CLSA—Here's Why

Hyundai Motor India Ltd. has been assigned an "Outperform" rating with a target price hike by CLSA. The brokerage initiated coverage on the company with a discounted cash flow (DCF)-based target price of Rs 2,155, implying a 24x multiple on FY27CL earnings per share (EPS), in line with the target valuation of market leader Maruti Suzuki India Ltd.

The company's strategy revolves around targeting the aspirational class through an affordable and diversified portfolio, with a current mix of 63% in Utility Vehicles (UVs). Despite facing market share erosion, the launch of new models and capacity expansion from its Talegaon plant, set to go live in financial year 2026, are expected to fuel growth from financial year 2027 onwards.

CLSA's report highlighted Hyundai's competitive advantage in unit economics, which it considers superior to that of Maruti Suzuki. This positions Hyundai Motor to regain market share once the Talegaon facility comes online. Additionally, the upcoming launch of the e-Creta, an affordable electric vehicle (EV), is seen as a significant step toward strengthening Hyundai's EV portfolio.

Hyundai has struggled with a loss of UV market share and is largely dependent on models like the Creta in UV segment (which accounts for 45% of HMIL's UV sales); CLSA believes the company must reduce its dependence on the Creta and introduce higher-priced SUVs in the Rs 20 Lakh+ segment, such as the XUV700 and Harrier. This is expected to become a focus once the new plant is operational in FY26.

Hyundai's revenue and earnings have underperformed recently, particularly in the compact and mini segments. However, the firm is set to meet the Corporate Average Fuel Economy (CAFE) standards by FY28, with a growing mix of CNG and EV vehicles. CLSA forecasts that Hyundai Motor will maintain an Ebitda margin of around 13% from FY25-27, despite rising fixed costs and a higher royalty rate. Cost control measures and a disciplined pricing strategy are anticipated to support profitability.

The brokerage also estimates that Hyundai will continue to make significant capital investments, with annual capex expected to reach Rs 3,000 crore in FY26-27. As a result, the company is projected to offer a free cash flow yield of about 3.4% in FY27.

While CLSA remains positive on Hyundai Motor's long-term growth prospects, the report acknowledges risks, including subdued growth in the domestic PV market, increasing competition, and rising royalty costs. Despite these challenges, the brokerage expects Hyundai to deliver a 10% revenue growth and 13% earnings compound annual growth rate (CAGR) from FY25 to FY27.