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MSIL’s 1QFY25 EBITDA margin came in at 12.7%, 150bps above JMFe. Sequential improvement (40bps) was owing to better mix and cost control initiatives. MSIL, with backto-back SUV launches has strengthened its presence in the B-segment (regained leadership position with c.28% mkt. share). The company plans multiple new launches (10+) over next 6-7 years (incl. 6 new EVs and Hybrid models). Near-term demand momentum is expected to be driven by CNG / UV portfolio. Benefit of richer portfolio mix and higher operating leverage is expected to support margins going ahead. We estimate revenue / EPS CAGR of 13% / 16% over FY24-27E. We ascribe 25x PE to arrive at Jun’25 fair value of INR 15,000. Maintain BUY. Pick-up in Strong Hybrid demand remains a key catalyst for re-rating. Revival in entrylevel segment remains a key monitorable.

*  1QFY25 - Margin beats estimate: MSIL reported net revenue of INR 339bn (+10% YoY, - 7%QoQ), 4% above JMFe. 4Q wholesales stood at c.521.8k units (+5% YoY, -10% QoQ). Realization increased by c.5% YoY (+3% QoQ). Discount during the quarter stood at INR 21.7k vs. INR 14.5k in 4Q. EBITDAM came in at 12.7% (+340bps YoY, +40bps QoQ), 150bps above JMFe. Reported PAT stood at INR 36.5bn (+47%YoY, -6% QoQ), 17% above JMFe.

*  Demand environment: Enquiries during 1Q were impacted by heatwave and general election. Despite this, retails were similar to previous qtr. Dealer inventory stands at 37 days, slightly above normal level (30 days). The company indicated that demand for entry segment continues to remain muted and it is hopeful of recovery in this segment in the medium-term. Recent launch of next-gen Swift has received good customer response and the company plans similar interventions to re-energise entry-level car demand. Overall, PV industry is expected to grow by low-to-mid single-digit in FY25 and MSIL is expected to grow ahead of the industry. With respect to exports, MSIL is targeting export vols. of 300k+ units (high single-digit growth) in FY25. Medium-term target (FY31) is to grow export vols. by 3x (to c.750k units). This is based on gradually increasing presence across regions and expanding product offerings.

*  Hybrid / EV launches: MSIL believes Strong Hybrids are consumer / environment friendly with good scalibility particularly given charging infra is still in nascent phase. The company indicated that it remains positive on this technology from medium-term perspective. On EVs – MSIL plans 6 EV model launches by FY31.

*  Margin outlook: MSIL’s EBITDA margin expanded by 40bps QoQ to 12.7%. This was led by better mix (60bps), favourable forex, lower RM cost and cost control initiatives (30bps), partially offset by negative operating leverage (80bps) and increase in Ad spends (30bps). Going forward, forex has turned unfavourable. However, higher operating leverage, favourable mix and cost control efforts are expected to support margins.

*  Other highlights: 1) MSIL expect SUVs to continue to do well and believes their share in industry vols. may further increase in the medium-term. The company indicated that its future product launches will also be aligned to shifting consumer preferences to address white-spaces. 2) CNG penetration for MSIL stands at c.33% in 1QFY25. MSIL’s CNG sales grew by 50% to 480k+ units in FY24 and the company targets to sell c.600k units of CNG vehicles in FY25. 3) Exports – Markets like LATAM, Middle-East and Africa are driving strong exports growth. 4) During the Qtr, the company added 100k units p.a. additional capacity at Manesar plant to cater to near-term demand. 250k units capacity addition at Kharkhoda plant is on track and expected to be operational in 2025. MSIL aims to set up four such plants with total capacity of 1mn units at Kharkoda. 5) Share of first-time buyers remain in the range of 40-43%. 6) Royalty for the qtr stood at 3.5%. 7) Road-tax waiver on Strong Hybrids in UP is effective now and customers have started getting benefit. However, it would be early to say there is a significant momentum building for Strong Hybrids owing to this.

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