Buy Hyundai Motor India Ltd For Target Rs. 2,050 By JM Financial Services
Margin beats estimate; New launches/capacity addition to aid growth
HMIL’s 4QFY25 EBITDA margin came in at 14.1%, 200bps above JMFe. 290bps sequential improvement in margin was due to higher operating leverage, favourable product mix, cost optimization efforts, and higher government incentives. Near-term outlook for the domestic PV industry remains challenging. For FY26, HMIL expects to grow broadly in line with industry estimates of low-single digit. Exports are expected to contribute 30% of its revenue by 2030. Medium-term volume growth is expected to be driven by 1) 26 launches (20 ICE + 6 EVs) planned over FY26-30, including 8 models by FY27, and 2) capacity addition in Pune plant (expected to commercialise in 3QFY26). In the near-term, initial ramp up cost will weigh on margins. We estimate revenue / EPS CAGR of 11% / 13% over FY25-27E. We maintain BUY with Mar’27 TP of INR 2,050 (23x FY27E EPS). Further details are awaited on the model launches and will be shared on the Investor day in Sep’25.
* 4QFY25 – Margin above estimates: HMIL reported net revenue of INR 179.4bn (+2% YoY, +8% QoQ), 2% above JMFe. 4Q wholesales stood at c.192k units (-1% YoY, +3% QoQ). Realization grew by c.2% YoY (+4% QoQ). EBITDA margin came in at 14.1% (- 20bps YoY, +290bps QoQ), 200bps above JMFe, primarily due to lower than expected RM cost. EBITDA stood at INR 25.3bn (flat YoY, +35% QoQ), 18% above our estimates. PAT stood at INR 16.1bn (-4%YoY, +39% QoQ), 18% above JMFe.
* Demand environment: The company highlighted softness in domestic demand during 4QFY25. However, SUV growth momentum remained strong, supported by rising customer preference in both urban and rural market (SUV vol. mix at 69% in 4QFY25 vs. 66% in 4QFY24). CNG penetration remained flat YoY at 13% during 4Q. Management remains cautiously optimistic on domestic demand, and expects HMIL to grow broadly in line with industry estimates of low-single digit in FY26. In the international market, sales volumes grew by 14% YoY in 4Q. The company indicated that tariffs have no impact on its exports. Despite global headwinds, HMIL remains focussed on expanding into new geographies and launching new products in existing markets. It expects 7-8% export volume growth in FY26 and aims for exports to contribute 30% of revenue by 2030.
* New launches: HMIL highlighted that recently launched Creta EV has received good customer response. The company plans 26 launches (20 ICE + 6 EVs) over FY26-30, comprising both new launches and model refreshes. Out of these, 8 launches are scheduled for FY26-27. Additionally, HMIL indicated its intention of entering into ecofriendly powertrains like hybrids.
* Margin outlook: EBITDA margin for 4QFY25 stood at 14.1% (-20bps YoY,+290bps QoQ). Sequential improvement in the margin was driven by higher operating leverage, favourable product mix, cost optimization efforts, and higher government incentives. HMIL highlighted that Creta EV is margin-positive (ex-launch related expenses), and higher localisation is expected to further support margins. While the new plant is likely to weigh on near-term profitability, HMIL aims to maintain double digit EBITDA margins.
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SEBI Registration Number is INM000010361
