InCred Equities retains 'Reduce' on Hyundai, lifts target; GST gain limited

Domestic brokerage InCred Equities has retained its ‘Reduce’ rating on Hyundai Motor India, even as it revised the company’s target price higher to ₹2,023 from ₹1,612. 

 

On the bourses, Hyundai Motor India share price remained under pressure, slipping 2.80 per cent to an intraday low of ₹2,659.10 per share. Around 12:00 noon, Hyundai Motor India share price was trading 1.44 per cent lower at ₹2,696.45. In comparison, BSE Sensex was trading 0.54 per cent lower at 80,719.70 levels.

 

The brokerage highlighted that while the recent Goods and Services Tax (GST) rate cut could provide some relief to the auto sector, its benefit for Hyundai’s revenue is limited.

 

According to InCred Equities research analyst, Pramod Amthe, “High revenue dependence on large SUVs, exports, parts and spares (70 per cent) will limit the revenue benefit from GST cut-led car demand revival.” 

 

InCred Equities noted that the GST rate cut’s advantage is largely restricted to only 30 per cent of Hyundai’s net sales, as high-teen growth in exports (15 per cent), parts and services (15 per cent), and large SUVs (40 per cent) has reduced the company’s reliance on products now under the new 18 per cent GST rate.

 

In comparison with peers like Maruti Suzuki and Tata Motors, Hyundai’s gains from the GST-led affordability boost are expected to be muted. 

 

“With high demand sensitivity expected in low-priced compact cars, Hyundai’s sales benefit will be limited versus peers,” the brokerage said. 

 

Analysts believe this will prolong Hyundai’s underperformance in domestic volume growth relative to Maruti Suzuki, a trend visible in recent months. Consequently, InCred Equities has raised FY26F-28F net sales by only 3 per cent, despite upgrading industry volume growth by 300-700 basis points (bps).

 

Hyundai’s new Pune plant, recently commissioned, is expected to contribute to a near 30 per cent capacity expansion. InCred Equities analysts noted, “The new plant will initially be used for making Venue and Exter refresh models, while the new compact car launch is scheduled in FY27F.” The company’s India-dedicated Electric Vehicle (EV), planned for CY27F, is also a key monitorable.

 

However, the new plant is likely to pressure Hyundai’s Ebitda margin in the near-term. “High overheads of the new plant will exert pressure on the Ebitda margin in the short-term, till the plant achieves optimal capacity utilisation,” the brokerage said. 

 

Despite this, analysts have raised FY26F-28F earnings per share (EPS) by 2-7 per cent, reflecting favourable Rupee (INR) depreciation benefits, compared with 2-8 per cent for Maruti Suzuki post-GST rate cut. 

 

Analysts also flag valuation concerns. Hyundai’s share price rally ahead of the GST rate cut has widened its forward precise-to-earnings (P/E) premium relative to Maruti Suzuki by 26 per cent, which analysts deem ‘difficult to sustain.’ 

 

While the target P/E has been raised to 24x one-year forward, a 20 per cent discount to Maruti Suzuki is maintained, supporting the ‘Reduce’ rating. 

 

The market share pressure will be a key thing to monitor, while new product launch success remains the primary upside risk, analysts said.