Shares of Hyundai Motor India Ltd, which saw a muted debut at Dalal Street on Tuesday, witnessed more selling pressure on its maiden trading session. The biggest IPO of the Indian stock market was not able to live up to the expectations of the street and retreated amid the selling pressure in the broader markets but has seen some fresh interest from a number of brokerages.
Hyundai Motor India shares were listed with a discount 1.48 per cent to Rs 1,931 on BSE against the issue price of Rs 1,960 on Tuesday. The stock dropped another 5 per cent to Rs 1,846 during the session, taking the overall fall to 6 per cent over the issue price. However, brokerages are mostly positive on the issue and have initiated coverage on the stock alongside listing itself.
Hyundai is likely to report an 8 per cent volume CAGR over the next two years, said Motilal Oswal in its IC report. "Following a moderation in FY25E earnings, we expect HMI to post 17 per cent earnings CAGR over FY25-27E. We believe that while both OEMs are very close in competency and future growth potential, we can ascribe a slight premium to Hyundai over Maruti," it said.
"We assign a 27 times one-year Fwd PER multiple to Hyundai, relative to our target multiple of 26x currently assigned to MSIL. Therefore, we arrive at our target price of Rs 2,345 for Hyundai Motor India, based on 27 times September 26E earnings," it added. Motilal sees lack of revival in demand, supply chain issues, regulatory disruptions, a delay in new facilities; and rise in commodity price as key risks.
Macquarie also initiated coverage on the debutant PV player citing it is a premiumisation and growth pure play. "We believe HMIL deserves to trade at a premium PE multiple versus peers due to its favourable portfolio mix and premium positioning," it said.
Powertrain optionality, including parent capabilities and market share upside risk from new models/powertrain launch, are medium-term positives, it said with an 'outperform' rating on the stock with a target price of Rs 2,235, the global brokerage said.
Another overseas brokerage firm Nomura also initiated coverage on Hyundai Motor India on the listing day itself. The company is riding on style and technology, while ongoing premiumization should drive high-quality growth, said Nomura. Long runway for Indian car industry – current penetration at 36 cars per 1,000 people, it said.
"Estimates to deliver 8 per cent volume CAGR over FY25-27F driven by 7-8 new models (including facelifts) and its Ebitda margins to improve to 14 per cent by FY27F from 13.1 per cent in FY24 led by improving mix, cost reduction & operating leverage," added Nomura with a target price of Rs 2,472 and a 'buy' tag, suggesting a upside of 26 per cent in the stock.
Despite a muted listing, Hyundai's strong fundamentals, being the second-largest passenger vehicle manufacturer in India and its strategic focus on the SUV segment, continue to support its long-term growth prospects, said Shivani Nyati, Head of Wealth at Swastika Investmart. "Investors who entered with a long-term perspective may consider holding the stock," she said.
However, Emkay Financial Services initiated coverage on Hyundai Motor India with a 'reduce' rating amid a lackluster 5 per cent EPS CAGR over FY24-27E. HMIL has established a strong franchise in India; however, lack of major launches over the next 12-18 months, muted 5 per cent capacity CAGR, higher royalty, and lower treasury income are likely to restrict EPS growth, it said.
While Maruti Suzuki also faces similar near-term growth challenges, we prefer it over HMIL given its catch-up on operational and financial metrics with a much diversified product and powertrain mix and a higher growth optionality driving a superior 6 per cent and 10 per cent revenue and EPS CAGR over FY24-27E," it added with a target price of Rs 1,750.
On the other hand, Sagar Shetty, Research Analyst at StoxBox gave an 'avoid' rating to the issue and will reassess our rating in future following sustained business performance in upcoming quarters. "The recent depletion of HMIL’s cash and bank balances following hefty dividends by the Indian entity to its South Korean parent raises doubt about its expansion plans," he said.