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New launches to aid market share recovery

Exports likely to be the key growth driver

* In this note, we highlight that it is only in two sub-segments within UVs (combined contribution at 10%), where MSIL may find it difficult to gain share and in most of the other segments, MSIL has a potential to ramp up its presence. Given its strong launch pipeline, MSIL appears well placed to gain meaningful market share in UVs in the coming years, thereby allaying investor concerns.

* Exports are likely to remain its key growth driver as MSIL aims to achieve exports of 750-800k units by 2031, which should translate into a 15% volume CAGR.

* We believe MSIL’s multi-tech approach is best suited for Indian conditions as India is not yet ready for a transition to electric vehicles (EVs).

* While the timing cannot be predicted, we believe that car demand can revive in the coming years, having seen many years of underperformance, and MSIL should emerge as a major beneficiary of the revival.

* At 23x FY26E/21x FY27E EPS, MSIL is among the few largecap OEMs available at a discount to historic valuations. Reiterate our BUY rating with a TP of INR14,500, valuing at 26x Dec’26E EPS.

New launches to help gain share in UVs, allay investor concern

In this note, we highlight that it is only in two sub-segments within UVs (combined contribution at 10%), where MSIL may find it difficult to gain a material share. In most of the other segments, it has the potential to ramp up its presence relative to peers, either with existing launches or upcoming new launches. Further, as per media reports, MSIL is expected to launch six new models in the next three to four years in its focus segments within SUVs. Thus, MSIL is well placed to gain market share even in UVs in the coming years, thereby allaying investor concerns around the same

Exports likely to remain key growth driver

MSIL aims to achieve exports of 750-800k units by FY31, which should translate into a 15% volume CAGR in the same period. To achieve the target, MSIL is taking several initiatives: 1) introducing more models in its markets – Fronx and Jimny have emerged as their top two export models; 2) making India the export hub for EVs for Suzuki – starting with the launch of the upcoming eVX, MSIL plans to launch six EVs by FY31; 3) expanding in more markets – Fronx was the first MSIL SUV to be launched in Japan and is seeing good response; 4) further ramping up its distribution network.

MSIL’s multi-tech approach augurs well for India

While electric vehicle adoption seems to be the preferred bet to meet upcoming emissions compliance, we think India is not yet ready to transition to EVs anytime soon. Given this, MSIL’s multi-tech approach seems best suited to meet emission compliance in India. In CNG, it is a market leader in PVs and the contribution from CNG has now increased to 24% in FY24 to 450k units with a target to sell 600k units in FY25. It has also introduced strong hybrids in Grand Vitara and Invicto in partnership with Toyota and it also plans to launch Suzuki’s low-cost hybrid tech in India for low-end models. Further, in EVs, MSIL targets to achieve scale by focusing on exports first and ramping up presence in the domestic market, as and when EV demand improves. It is also working on vehicles compliant with flex fuels. Further, MSIL would emerge as the major beneficiary if the government considers a tax subsidy on any of these clean technologies (hybrid or flex fuels).

India will have a healthy mix of cars for a long time

Before writing off the car segment, one has to remember that there is a huge population of 2W customers in India who aspire to own their first car. Further, family nuclearization is driving household growth, which should boost demand for cars in the coming years. Cars are likely to remain relevant in India due to their compact size, fuel efficiency and versatility, making them the ideal choice for firsttime buyers. While we do believe that the small car segment will certainly not go back to its previous peak, we expect the contribution of this segment to stabilize at least at the current level if not go up in the near term. Whenever this happens, MSIL is expected to emerge as a major beneficiary given its dominant position in this segment with close to 63% market share.

Valuation and View

For FY26, we see multiple launch tailwinds for MSIL, such as its first EV for India and exports, hybrid variants, and one SUV. Further, any favorable policy for hybrids by the government may drive a re-rating as MSIL would be the key beneficiary of the same. We expect MSIL to deliver an 11% earnings CAGR over FY24-27E, driven by new launches and strong export growth. While we have factored in stable margins over FY24-27E, there could be an upside risk to our estimates if PV demand revives and MSIL is able to retain the benefits of an improving mix. At 23x FY26E/21x FY27E EPS, valuations appear attractive. Reiterate our BUY rating with a TP of INR14,500, valuing at 26x Dec’26E EPS

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