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Capacity addition and new launch pipeline create headroom for growth; competition a key risk

We initiate coverage on HMIL with a HOLD rating and a target price of Rs 1,985, implying an upside of 5%. The company has tailwinds such as new capacity addition, strong product launch pipeline, exports traction, and strong global parentage. However, risks persist mainly in the form of loss of market share, less traction in domestic market vs. peers, and lower diversification in the fuel mix. The market share loss has continued even after the GST 2.0 tailwinds, with market share declining from 16.1%in FY19 to 12.6%in 9MFY26.

Talegaon capacity addition unlocksthe growth pipeline

HMIL operated at near-peak utilisation of 92–97% through FY23–25, restricting both volume growth and new launches. The commercialization of Talegaon plant has added 1,70,000 units of capacity in phase 1, bringing overall utilisation down to ~85%, thus creating headroom for growth. The planned 26-model launch pipeline through to FY30E is also linked to this plant commercializing, and hence should start generating some traction going ahead. The new launch pipeline is a mix of new nameplate launches, model refreshes as well as derivatives. Growth going ahead will be crucial, as the company has seen market share loses in the domestic PV industry for last few years

Diversification of powertrain mix to help tap a broader customer mix

Hyundai Motor India’s domestic fuel mix remains predominantly internal combustion engine (ICE)-led, with petrol and diesel together accounting for ~86% of volumes in FY25. CNG accounted for 13%, vs. industry level of 19%. Hybrid+ EV share was also lower for HMIL at just 1%, vs. 5% for the industry. By FY30E, Hyundai targets to diversify its fuel mix, with over 50% of its sales expected from eco-friendly powertrains, with the mix expected to comprise ~17% EVs, ~16% hybrids and ~20% CNG. Expansion of powertrain options across ICE, CNG, hybrid, and EV should help the company to tap consumer demand across the segments. However, the eV portfolio is yet to gain significant traction.

Exports — leveraging India as HMC's global hub

HMIL is the second-largest exporter in the domestic PV industry. HMIL’s strategic intent is to scale exports to 30% of volume share of HMIL by FY30E, up from 21.4% in FY25 to 26.2% in 9MFY26. Growth will be driven by India's growing acceptance as a cost-competitive manufacturing base in export markets, and HMC’s focus on HMIL as a export hub for emerging markets

Valuation and View

We factor in a volume CAGR of 5.7% over FY25-28E, aided by Talegaon capacity ramp-up and a refreshed launch pipeline. We expect a Revenue/EBITDA/PAT CAGR of 7.1/8.0/7.5% over the same period. Since listing, HMIL has traded at an average 1-year forward PE of 29.4x. The current PE is at 25.2x.

While there are potential opportunities for the company to accelerate its growth, we are yet to see that reflect in numbers, as it has continued to underperform vs. the top 3 players in domestic retail sales. Key inflection points could be attractive new launches, success in EV, increasing the CNG portfolio, and moving the needle positively on market shares. Additionally, current uncertainty related to geopolitical developments warrant caution. Accordingly, we assign a discounted PE of 23x for HMIL to FY28E EPS of Rs 86.2, arriving at a price target of Rs 1,985. With a potential upside of 5%, we initiate with a HOLD rating on the shares of Hyundai Motor India Ltd

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