The IPO-bound Hyundai Motor India believes it is well-placed to ride the domestic passenger vehicle sales upcycle, with 63 per cent exposure to high-growth utility vehicles (UVs). Nuvama Institutional Equities, which met with MD Unsoo Kim, CFO Wangdo Hur and COO Tarun Garg of Hyundai Motor India, said Hyundai Motor India is expanding its capacity from 8.2 lakh to 10.7 lakh units to support growth in domestic and overseas markets.
Hyundai Motor India is focusing on expanding model portfolio, with four EVs planned over next few years. In addition, Nuvama said there is scope for introducing global models in India.
In an analyst meet, the Hyundai management highlighted that the car maker's localisation efforts could improve profitability in areas of powertrain parts, transmission, ADAS parts and EV batteries. The Rs 27,870 crore IPO will hit the market on October 15.
Hyundai Motor India clocked a profit of Rs 4,400 crore in the first nine months of FY24. On an annualised FY24 PAT basis, the valuation comes in at 27 times EPS at top end of IPO valuation of Rs 1,59,300 crore.
"The parent is likely to offload a 17.5 per cent stake. HMI’s 9MFY24 PAT was Rs 4,400 crore. If we annualise the earnings and assume a 5 per cent PAT CAGR over FY24–27E, its PAT increases to Rs 6,800 crore. At the top end of IPO valuation, FY27E P/E works out to 24 times. Earnings growth is assumed in single digits, to factor in increase in royalty and reduction in other income due to a large dividend payout of Rs 10,800 crore in January 2024.
Here are analyst meet takeaways by Nuvama:
Premiumisation: In HMI's overall portfolio, UVs contributed 63 per cent, hatchbacks 23 per cent, and sedans 14 per cent in FY24. SUV penetration is broadly at similar levels in both rural and urban regions. The focus is on improving sales in UVs, through more product launches across price points and powertrains.
Touchpoints: HMI had 1,366 sales outlets and 1,550 service outlets across India, as of December 2023. The urban and rural mix of sales outlets is 721 and 645, respectively. The focus is on further expanding the network.
EV pipeline: The company plans to launch four EVs in both mass and premium segments over medium term. The Creta EV is slated for launch in Q4FY25.
Export opportunity: HMI serves as an export hub for models such as Verna and Venue, and is on track to becoming HMC’s largest export hub.
Localisation: It is currently at 80 per cent. This should increase with localisation of components such as automatic transmissions, powertrain parts, ADAS systems, EV batteries, etc. Royalty rate is expected to remain steady at 3.5 per cent over long term.
Capex: HMI has announced investments of Rs 32,000 crore over the next ten years. Of this, Rs 6,500 crore has been allocated for the Talegaon plant. Capacity utilisation stood at 96 per cent in FY24. Chennai plant is spread across 537 acres, and has production capacity of 0.82 million units across 13 models.
Talegaon plant: HMI acquired General Motors’ Talegaon plant, which would add 0.17mn units to its production capacity by H2FY26E and an additional 0.08mn units by FY28E, lifting its total capacity to 1.07mn units. This represents a 30 per cent increase over current levels.