Hyundai's Parentage, Diverse Portfolio, Wide Sales Network Fetch Citi's 'Buy'

Hyundai Motor India Ltd. received a 'buy' rating from the Citi Research with a target price implying 23% upside potential. The brokerage highlighted its strong parentage, diverse product portfolio, wide sales and distribution network, and focus on premiumisation as key positives, as it began covering the newly-listed car maker.

Hyundai Motor India is a subsidiary of Hyundai Motor Co. Korea, which provides the former support in terms of design, research and development, manufacturing, sales, marketing and distribution. The access to global portfolio via strong parentage makes Hyundai Motors nimble to introduce new models, technologies, and features in India, according to Citi Research.

Hyundai Motor Group is the third largest original equipment manufacturer in the world, based on passenger vehicle sales in 2023, Citi Research said.

In India, the car maker has established a reliable brand image, which Citi considers important in retaining market share in the highly competitive passenger vehicle market.

Hyundai Motor India has 13 passenger vehicle models across all major segments by body type—sedan, hatchbacks, and sports utility vehicle, Citi Research said. The diverse portfolio has powertrain fuel options across petrol, diesel, compressed natural gas, and electric vehicle, with various transmission options. The company wants to increase its presence in the electric vehicle segment sustainably.

Hyundai Motor India had 1,377 sales outlet across 1,036 cities and towns in India as of June 1, 2024. It had 1,561 service centers across 957 cities in India, Citi said.

Key Risks 

Any adverse trends—unemployment levels, discretionary income, inflation, interest rates, and consumer confidence—in broader macro space will lead to lower demand for passenger vehicles.

In the past five years, competition in Indian passenger vehicle market intensified, and Hyundai Motor India faces competition from both domestic and foreign automobile manufacturers. Hence, there's a risk of facing decline in the market share.

Further, any disruption to logistics could affect the availability of automobile parts as Hyundai Motor sources parts from various vendors within India and outside India.

Hyundai Motor India Vs Maruti Suzuki India 

Citi Research gave Hyundai Motor stock a target price of Rs 2,250 apiece, implying 23% upside potential. The brokerage came up with the target price based on their 22 times FY26E EV/EBIT target multiple, which is at 5% discount to target multiple for peer Maruti Suzuki India Ltd. Hyundai Motor India's peer company is Citi Research's top pick in the India auto space.

As a much older and larger peer, Maruti Suzuki India competes with Hyundai Motor India. The Swift Dezire maker has a relatively lower-end portfolio, with no diesel offering. Given Maruti Suzuki India's proven track record in India and larger market share, Citi Research's target for EV/EBIT multiple is 5% lower than Maruti Suzuki India.

Hyundai Motor India has widened its powertrain spectrum with focus on CNG, which is Maruti Suzuki India's forte till now. Both companies are likely to launch electric vehicles in 2025. On EBIT margins, both the companies are quite similar, however, Hyundai Motor India has better return ratio. On the other hand, Maruti Suzuki boasts of greater manufacturing scale with formidable expansion plans.

Citi Research prefers Mahindra & Mahindra Ltd. and Hyundai Motor India Ltd. after Maruti in the India auto space.