Stock to buy: Hyundai Motor India share price witnessed a sharp turnaround on Wednesday, October 23 following a disappointing stock market debut a day earlier.
The stock jumped 6 per cent to the day’s high of ₹1,928.15 today after a 5 per cent decline on its listing day on Tuesday.
The stock closed at ₹1,845 on the NSE and ₹1,846.95 on the BSE in the previous session after listing at around 1.3 per cent discount to its issue price of ₹1,960.
At around 1.10 pm, Hyundai Motor India share price was trading in the green, up 4.81 per cent at ₹1907.95 on the BSE.
Should you buy Hyundai Motor shares?
Despite a weak debut, several brokerages remain bullish on the stock. Macquarie and Nomura initiated coverage on the stock ahead of its listing with positive ratings.
The stock received a ‘buy’ rating from Nomura, with a target price of ₹2,472. Meanwhile, Macquarie assigned an ‘outperform’ rating, setting a target price of ₹2,235. Today, domestic brokerage Motilal Oswal initiated a ‘buy’ rating and set a target price of ₹2,345, reflecting optimism about the company’s future. However, Emkay issued a “reduce” rating with a target of ₹1,750.
Hyundai Motor India’s (HMIL) listing performance was seen as underwhelming, with the stock ending 7% below the upper range of its IPO price band. Market analysts were not expecting a strong debut, largely due to its high valuation. At 26.7 times its annualised Q1FY25 earnings, the stock appeared fully priced, according to many.
Motilal Oswal noted that while FY25 is expected to be a challenging year for the passenger vehicle (PV) market in India, it foresees Hyundai Motor India posting an 8% compound annual growth rate (CAGR) in volume over the next two years. Additionally, it projects a 17% earnings CAGR from FY25 to FY27 following a likely moderation in FY25.
Comparing Hyundai to Maruti Suzuki, its main competitor, Motilal Oswal sees Hyundai as having a slight advantage. Hyundai’s technological capabilities, strong financial performance, and its premium brand perception give it an edge. The brokerage assigned a 27x forward price-earnings ratio (PER) for Hyundai, compared to Maruti Suzuki’s 26x, resulting in their ₹2,345 target price for the stock.
There were, however, concerns surrounding the IPO. Investor scepticism stemmed from Hyundai’s parent company’s lower valuation and a substantial ₹15,435 crore dividend payout in FY24—ten times that of FY23. Additionally, a royalty hike from 2.2% to 3.5% of sales starting in June 2024 also weighed on sentiment. Despite these concerns, the IPO managed to attract institutional investor support on its final day, even as other offerings saw oversubscription early on.
From a broader market perspective, Hyundai’s focus on utility vehicles (UVs) offers some optimism. Although overall PV sales in India grew just 0.5% year-on-year in April-September 2024, UV sales surged by 13.2%. With 67% of its sales coming from UVs, Hyundai is well-positioned to capitalise on this shift in consumer preferences.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.