Hyundai Motor India shares skid 5%; record new low on muted Q2 performance

Looking ahead, the company anticipates better performance owing to the new launch of Creat EV in January, along with the recent launch of new variants of the Venue and Alcaazar models.

Shares of Hyundai Motor India (HMIL) hit a new low of Rs 1,713.25, falling 5 per cent on the BSE in Wednesday’s intra-day trade amid heavy volumes after the firm reported a 15.5 per cent year-on-year (YoY) decline in its net profit at Rs 137.55 crore for the quarter ended September 2024 (Q2FY25), due to weak market sentiments and geo-political factors.

 

The company’s revenue from operations decreased 7.5 per cent YoY at Rs 17,260 crore from Rs 18,660 crore in the corresponding quarter of the previous year. Earnings before interest, tax, depreciation, and amortization (EBITDA) margin contracted to 12.78 per cent from 13.08 per cent.

 

 

Despite the sluggish market conditions, the management said the company has successfully maintained profitability in H1 FY25, largely due to our proactive and continuous cost control measures.

 

On the future outlook, in the mid to long term, the company expects a sustained demand momentum in the industry and will continue to focus on quality of growth by maintaining an optimum balance between volume, market share and margins.

 

At 12:25 pm; HMIL was trading 4 per cent lower at Rs 1,732, as compared to 0.6 per cent decline in the BSE Sensex. The stock was quoting 13 per cent below its issue price of Rs 1,960 per share. The company made its stock market debut on October 22, 2024.

 

HMIL, a subsidiary of Hyundai Motor Company, is the world's third-largest auto original equipment manufacturer (OEM) by passenger vehicle sales. In India, it has been the second-largest passenger vehicle manufacturer since 2009. The company produces innovative, feature-packed four-wheelers, transmissions, and engines, utilising cutting-edge technology.

 

Slowdown in domestic sales volume showing 6 per cent YoY decline to 1.5 lakh units impacted the overall performance. Also, the export volumes reported a steepest decline of 17 per cent YoY to 42k units, mainly due to the red sea crisis, which particularly affected sales in middle east, which is a key export market for the company. However, the company witnessed over 30 per cent increase in registration during this festive season, helping reduce the inventory level to 30 days. Moreover, CNG penetration for its flagship model Exter increased at the highest of 28.4 per cent in October v s 22.2 per cent in Q2FY25 vs 18 per cent in Q1FY25, ICICI Securities said in a note.

 

Looking ahead, it anticipates better performance owing to the new launch of Creat EV in January, along with the recent launch of new variants of the Venue and Alcaazar models. Over the long-term perspective, the brokerage firm remains positive on the stock due to consistent growth outlook amid industry tailwinds, a healthy line u p of SUVs, & capital efficient business model (RoE, RoCE: 20 per cent plus) with cash surplus balance sheet.

 

HMIL has guided to a low-single digit PV industry growth on a high base and a challenging demand scenario. HMIL has established a strong franchise in India; but lack of major launches (key growth driver historically in PVs) over the next 9-12M, muted 5 per cent capacity compound annual growth rate (CAGR), higher royalty, and lower treasury income are likely to restrict EPS CAGR to 4 per cent over FY24-27E, according to analysts at Emkay Global Financial Services.

 

The brokerage firm trimmed FY25E/26E/27E EPS by ~2.5 per cent each, to factor in the weak demand scenario. “We prefer Maruti Suzuki India (MSIL) over HMIL (refer to our Hyundai IC report), given its catch-up on operational and financial metrics (even on a lower SUV mix) with a much diversified product and powertrain mix, and a higher growth optionality (potential small-car recovery, aggressive 8 per cent capacity CAGR, 7-seater SUV launch in H2FY26E, and 10 new models by 2030),” analysts said. However, the stock price of HMIL is currently trading below the analyst’s target price of Rs 1,750 per share.

 

Meanwhile, Motilal Oswal Financial Services (MOFSL) reiterates BUY rating on HMIL with a target price of Rs 2,235 per share.

 

When comparing HMI with MSIL, which is its closest peer, we believe that while both OEMs are very close in competency and future growth potential, we can ascribe a slight premium to HMI over MSIL given HMC’s technological prowess in emerging technologies that can be customized to meet Indian customer requirements as needed; superior financial metrics; a relatively premium brand perception; and better alignment with industry trends, MOFSL said in result update.