- Goldman Sachs initiates coverage on Hyundai Motors India with a Buy rating and Rs 2,600 target
- Hyundai’s product cycle and capacity expansion position it to gain market share and grow
- The company may benefit from a domestic car market recovery and interest rate cuts
Goldman Sachs has initiated its coverage on Hyundai Motors India with a 'Buy' with a target price of Rs 2,600. The broking's optimistic outlook is based on its belief that Hyundai is exceptionally well-positioned to capitalise on a major stress point in the auto industry. The view is driven by key factors, like the company's product cycle, capacity expansion, and favourable macroeconomic conditions.
Goldman Sachs highlights that the company is in a strong position to launch new products and gain market share as it expands its manufacturing capacity. This strategic "catch-up" is expected to be a significant growth boost.
The brokerage also notes that Hyundai is well-leveraged to benefit from a potential recovery in the domestic car market and ongoing interest rate cuts, which are likely to boost consumer spending on big-ticket items like cars. Further, the analyst sees a positive impact from the anticipated income tax stimulus resulting from upcoming civil servant wage revisions.
The brokerage notes confidence in Hyundai's electric vehicle strategy, stating that the company has the "right to win" in this crucial and growing segment. This is supported by Hyundai's recent outperformance against its competitor, KIA, in emerging markets.
Finally, the note projects that as the company's new plants mature, it will generate higher free cash flow in the coming years. Key risks that the brokerage notes at initiation include concentration in Creta and Venue models, rising SUV competition and market share competition with KIA. They also flag a carbon compliance risk for the company.
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