Buy Hyundai Motor India Ltd for the Target Rs 2,450 by Emkay Global Financial Services Ltd
HMIL reported a weak 1Q, with revenue down 3% yoy (3% miss vs estimates), led by 1.3% yoy dip in volume growth (Jun-26 impacted by fire at Mobis) and ~2% lower ASPs qoq on unfavorable volume mix. EBITDA fell 34% yoy to Rs14.5bn on weak gross margin at 25.2% (down ~180bps qoq), primarily from rising copper/precious metal prices which, in turn, led to weak PAT (-36% yoy). HMIL retained its FY27 domestic/export volume growth guidance of ~8–10% (vs ~6–9% industry growth), implying a stronger 2HFY27 (implied 9MFY27E domestic growth of ~10.4%), aided by production normalization (fire impact behind, Middle East recovering) and improving product launch cycle (2 new launches with minimal discounting). The management also highlighted that the preponement of Pune plant's third shift to Oct-26 (2Y ahead of schedule) and higher Chennai Plant-1 utilization (~90–92% vs 72% now) should improve operating leverage, while lower discounts/cumulative price hikes (~100bps taken in 1HCY26) should aid margin recovery in 2H. We raise FY28E volume/EPS by ~2%/6%, factoring in slightly better volumes for the 2 new models. We maintain BUY and raise TP by ~7% to Rs2,450 (from Rs2,300), basis 25x core Jun-28E EPS + cash/share of Rs172.
Likely a bottom operational quarter; slight PAT beat due to higher other income
HMIL reported a weak 1Q, with revenue down 3% yoy, led by 1.3% yoy dip in volume growth and 2% lower ASPs qoq on unfavorable volume mix (lower share of Creta). EBITDA fell 34% yoy to Rs14.5bn; EBITDAM was down by ~130bps qoq to 9.1%, owing to gross margin compression of ~180bps qoq on account of rising copper/precious metal prices. APAT fell 36% yoy to Rs8.8bn (~4% above estimate due to higher other income).
Earnings KTAs
1) The management retained its full-year domestic/export volume growth guidance of ~8–10% and expects to outpace the broader industry (~6–9% expected in FY27).
2) Pune plant’s third shift advanced will start in Oct-26 (2Y ahead of schedule), boosting Venue capacity. The 2 new model launches in 2H are expected to boost capacity utilization of Chennai Plant 1 to ~90-92% in 2H (72% earlier; dip due to Venue model shifting to Pune plant).
3) 1Q margins were hit by four factors:
i) the production disruption that cut volumes of its high-margin Creta model
ii) the loss of Middle East export volumes
iii) commodity cost pressure; and iv) Pune capacity-stabilization (yoy basis).
4) The new mid-size ICE SUV has been positioned deliberately apart from the Creta (in the 4.0–4.4 meter space, aimed at younger, tech-oriented buyers), so limited cannibalization is expected.
5) Middle East exports were disrupted, but are now reopening, with Jul-26 shipments up, along with a strong order backlog. SUV exports remain at ~13–14% of the mix (vs 70% for domestic), leaving significant headroom to lift the SUV share/ASPs.
6) The company is targeting Day-1 readiness for the PLI scheme on its new EV, which requires 50% domestic value addition, and is pushing hard on localization, which stands at ~83% (vs ~77–78% a few years ago) and targeting ~90% by FY30. 7) HMIL confirmed zero penalty under CAFE-2 norms; it is already aligned with CAFE 3 draft notification
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