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A Future KEY CHANGES -Ready Auto Player with Strong Parentage : TARGET

Hyundai Motor India Ltd. (HMIL), established in 1996, is a wholly owned subsidiary of Hyundai Motor Company (HMC) and the second largest automobile manufacturer in Indian passenger vehicles (~15% market share FY24). HMIL manufactures and sells four-wheeler passenger vehicles. HMIL’s portfolio includes 13 models across various segments along with EVs (electric vehicles) and sold nearly 12 million passenger vehicles both domestically and through exports. HMIL has 3 manufacturing facilities across India, 2 in Chennai and 1 in Talegaon, with a capacity utilisation of 97% in FY24.

* India’s domestic PV (passenger vehicles) sales volume rose at 5% CAGR (FY19-24) to reach 4.2 million vehicles in FY24 and is expected to clock 4.5-6.5% CAGR over FY24- 29E to reach 5.2-5.7 million domestic vehicle sales. (source: CRISIL MI&A)

* PV exports from India grew at 1.4% in FY24 (hindered by global economic slowdown) and are expected to grow at a CAGR of 7-9% between FY24-FY29, backed by economic stability & growth, increased push from OEMs and India’s trade agreements.

* In CY23, HMIL was among the top 3 contributors to HMC’s (promoter company) global sales volumes, and their contribution to HMC’s sales volumes increased from 15.48% in CY18 to 18.19% in CY23.

* HMIL has reported consistent growth in both top-line and bottom-line. Revenue grew at a CAGR of 21% to Rs. 69,829cr (in FY24) and PAT grew at a CAGR of ~45% to Rs.6,060cr over FY22-24, led by better sales volume and operating efficiency.

* EBITDA grew at a CAGR of 29% while EBITDA margins were steady in the range of 12- 13% over FY22-24, led by localisation, favourable mix and economies of scale.

* Through the acquisition of a manufacturing plant in Talegaon, Maharashtra, the HMIL plans to increase its production capacity from 824,000 units in FY24 to 1,074,000 units per annum, aided by calibrated approach with HMC.

* HMIL intends to expand its EV portfolio by launching 4 new models including Creta EV by Q4FY25.

* The company aims to broaden its vehicle lineups, advance its EV technology, and strengthen local manufacturing. To support these, HMIL has set aside ~ Rs. 32,000 cr. to leverage the growth potential of India’s EV market by 2030.

* At the upper price band of Rs.1,960, HMIL is available at a premium valuation of 26.7x P/ E ratio based on FY25E post issue annualised EPS. We assign a “Subscribe” rating to the issue for the long-term investment, given its strong parentage with HMC, healthy financial profile, sustained earnings, increased product mix in the SUV segment and enhanced focus towards Electric Vehicle space.

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SEBI Registration Number: INH200000345