IGI Logo

We upgrade HMIL to BUY from Add while maintaining TP of Rs2,200, at 25x FY28E PER, mainly on improved new product launch cycle visibility (key growth driver for domestic PVs). HMIL clocked a steady Q4, with revenue up ~5% YoY, led by ~9% volume growth amid ~1% lower ASP QoQ (adverse product mix). EBITDA declined by 22% YoY; EBITDAM fell by 80bps QoQ (elevated commodity prices, new plant related overheads, labor code impact, and a one-time 50- 60bps hit from past-period vendor payment, partially offset by pricing actions). HMIL guides for 8-10% domestic PV volume growth in FY27 (aims to outpace the PV industry), aided by supportive underlying demand and 2 new nameplates (localized mass-market compact E-SUV during the festive period and Bayonbased mid-size ICE-SUV in Q4); ICE SUV to strengthen HMIL’s presence and ESUV to address a key white space. HMIL also expects exports to grow 8-10%, led by its diversified market presence and multiple product actions. HMIL has raised its capacity expansion target, taking total capacity to 1.14mnpa units (6% CAGR over FY25-31) vs 1.08mnpa earlier. It guides for 11-14% EBITDAM range (FY26: 12.2%), as commodity-related headwinds would be managed via cost-reduction measures, calibrated price hikes, and higher utilization of the Pune plant. HMIL is confident about achieving compliance with CAFE-III norms, owing to its diversified powertrain presence. Our EPS estimates are unchanged. We build in revenue/EBITDA/EPS CAGR of 10-14% over FY26-28E.

Steady topline performance; margin hit by adverse mix, one-offs, labor code

Revenue was up ~5.4% YoY, led by 8.7% volume growth amid 1.2% lower ASPs QoQ on unfavorable volume mix (higher share of small cars). EBITDA fell 22% YoY to Rs19.7bn; EBITDAM was down by 85bps QoQ to 10.4% (hit by a 50-60bps past-period vendor compensation one-off and labor code impact). Thus, adj PAT fell 22% YoY to Rs12.6bn.

Earnings call KTAs

1) The management guides for 8–10% growth in domestic volumes in FY27, supported by strong underlying demand and the introduction of 2 new nameplates, with the aim of outpacing the broader domestic PV industry growth rate.

2) Two new models are planned for launch in FY27: i) a mid-size ICE SUV, which is expected to support market share gains, and ii) a dedicated, localized compact E-SUV. Both will be manufactured at the Chennai plant (will help improve capacity utilization at that facility).

3) It also expects exports to grow 8–10%, driven by a diversified market presence and efforts to identify alternate markets to mitigate the impact of the ME slowdown (HMIL is also evaluating alternate shipping routes to the Middle East), alongside multiple production initiatives.

4) EBITDAM is expected to stay at 11–14%, underpinned by i) cost-reduction efforts (localization and value engineering); ii) calibrated price hikes (1.6% implemented in Jan26, select hikes on the Venue in Mar-26, and another round planned for May-26—expects this to be the last one); and iii) improving capacity utilization at the Pune plant (currently operating at 2 shifts/day with 12k/month units production; HMIL will evaluate a 3rd shift depending on the demand scenario).

5) HMIL is expanding its distribution network with a strong rural focus, with 7 of 10 new outlets being added in rural areas. Rural penetration continues to rise and reached an all-time high of 24% in Q4.

6) HMIL is confident about meeting CAFE-III compliance, aided by diversified powertrains. 7) FY27 capex: Rs750bn (45–50% toward new product development) and 30% for plant-related investments (Phase-2 expansion of the Pune plant, Chennai plant upgradation).

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354