Reduce Hyundai Motor India Ltd For Target Rs. 2,023 By InCred Equities
Enters capex-intensive phase
* Company gives FY26F-30F capex guidance of Rs450bn to almost triple the gross block (23% CAGR), but post just 8% sales revenue CAGR by FY30F.
* All hopes lie on CY27F launch of a new nameplate, compact E-SUV, and the Genesis brand into India for regaining domestic market share of 15%.
* Post recent stock rally, positioning the forward P/E valuation at a premium to industry leader Maruti Suzuki will be difficult to sustain. Maintain REDUCE.
Key highlights from the Hyundai Motor India (HMI) investor meet
* Management gave guidance of Indian passenger car segment’s volume CAGR of 5.2% for the next five years, while Hyundai Motor India aims to outpace this with a 7% CAGR.
* HMI aims to grow revenue by 1.5x to more than Rs1,000bn by FY30F from Rs692bn in FY25, while achieving the EBITDA margin in the range of 11-14%.
* HMI plans to invest Rs450bn in FY26F-30F, with 60% allocated to product development and R&D, and the remaining 40% for capacity expansion and upgrades.
* HMI endeavours to capture over 15% domestic market share by FY30F, driven by utility vehicles (UVs) contributing more than 80% to sales, and eco-friendly powertrains (CNG, EV, and hybrid) accounting for over 50%. Exports targeted at 30% of sales by FY30F.
* Plans 26 product launches by FY30F, including seven new nameplates and entry into MPV and off-road SUV segments. By FY30F, the sales and service network to cover 85% of India's districts, with rural markets expected to contribute 30% to total sales.
* The Pune plant with 170k unit capacity, four vehicle assembly shops, and one engine shop, to start operations in coming weeks. Another 80k unit capacity planned by FY28F.
* Over 1,200 parts are sourced locally through 50+ new Tier-1 vendors, achieving 82% localization. The Localization 2.0 strategy targets advanced components (electronics, powertrains) via early integration, Tier-3 suppliers, and bolstered joint ventures/technical partnerships for innovation and efficiency to reach 90% localization.
* Ultra-luxury Genesis brand (Hyundai's premium line) to enter India in 2027 with ICE and EV SUVs like GV80 and GV70, starting low-volume imports before local production.
* New Venue (compact SUV) with Level 2 ADAS (sensor fusion), 12.3-inch dual displays (infotainment/cluster), OTA updates, & ventilated seats to be launched in Nov 2025F.
Rich valuation may not take the burden of capex-led RoCE dilution
* In its maiden India analyst meet post HMI listing, management gave guidance of an ambitious capex program to support its 26 new product launches to regain lost market share, so as to post an 8% sales revenue CAGR over FY25-30F for a 23% capex CAGR. This, we feel, will dilute RoCE sharply from 40+% currently. Our estimates look ambitious, as we build in 12% sales & 20% capex CAGRs, respectively, over FY26F28F.
* While the cash-rich balance sheet is capable of aiding capex, it will be eating a major portion of operating free cash flow (avg. Rs70bn per annum for the last five years). Market share ambition to impact the EBITDA margin. With HMI’s forward P/E valuation at a 10% premium to industry leader Maruti Suzuki, we retain our REDUCE rating on it.
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