Given the prevailing headwinds that the global automobile industry is facing, along with signs of slowdown in India, the upcoming initial public offer (IPO) by Hyundai Motor India Ltd might not be a great deal for Indian investors, Aequitas Investments said in its latest note.
Despite contributing only 6.5 per cent of Hyundai's global revenues and 8 per cent of its profitability, Hyundai’s India unit will be valued at 42 per cent of the South Korean parent's market capitalisation on listing, Aequitas Investments said.
Hyundai Korea is looking to offload Rs 25,000 crore worth of shares through the offer for sale (OFS) in the domestic market. From Hyundai’s perspective it’s a no-brainer, as its stock in South Korea trades at a PE of just 5 times, Aequitas Investments noted, adding that the biggest Diwali celebration this year is to happen in Seoul, South Korea.
Globally, Mercedes has slashed its guidance this year, Aston Martin has given a profit warning, BMW downgraded 2024 outlook on weak China demand while Toyota Motors production fell globally for the seventh straight month.
Asking whether premium commanded by Indian car makers is justified, Aequitas Investments noted that car sales were down in September for the third straight month. Maruti Suzuki India commanded a PE of 27 times. Only Ford Motors in the global peer group commanded a double digit PE of 11 times, it suggested.
Nomura India differs. Earlier in a September note it said Hyundai Motor India deserved a valuation premium vis-a-vis Maruti Suzuki India Ltd, considering latter's ongoing market share decline.
As the second-largest automaker in India, Hyundai Motor India's market share has been stable at 15-17 per cent since 2008, it said adding that the company recorded the highest-ever domestic sales of 6,02,000 units in 2023, a 9 per cent growth YoY.
The strong performance was driven by compact and mid-size SUVs, particularly Creta, Exter and Venue models, Nomura India said. "Its YTD August wholesales increased 2 per cent, slightly underperforming the industry sales +6 per cent YoY, while we expect the growth to reaccelerate into 2025-26, thanks to the launch of new models including Creta EV in 2025 and petrol-HEV SUV(Ni1i) to be produced in the newly-acquired GM’s (GM US, Reduce) Galegaon plant in 2026," Nomura India said.