Stocks to Buy: Hyundai Motor India’s share price witnessed a sharp uptrend on Wednesday, October 23, after a disappointing start in the stock market a day earlier.
The stock jumped 6 percent to the day’s highest level. After a 5 percent fall on the day of listing on Tuesday, it reached 1,928.15 today.
but the stock closed 1,845 more on NSE It was at Rs 1,846.95 after being listed on the BSE at a discount of about 1.3 per cent to its issue price in the previous session. 1,960.
At around 1.10 pm, Hyundai Motor India’s share price was trading in the green, up 4.81 per cent. 1907.95 on BSE.
Should you buy Hyundai Motor shares?
Despite the weak start, many brokerage companies remain bullish on the stock. Macquarie and Nomura Initiated coverage on the stock before it was listed with a positive rating.
The stock received a ‘buy’ rating from Nomura, with a target price 2,472. Meanwhile, Macquarie gave an ‘outperform’ rating while setting a target price 2,235. Today, domestic brokerage Motilal Oswal initiated ‘Buy’ rating and set target price 2,345, indicating optimism about the company’s future. However, Emkay issued a “low” rating with the target 1,750.
Hyundai Motor India (HMIL)’s listing performance was disappointing, with the stock ending 7% below the upper end of its IPO price band. Market analysts did not expect a strong debut due to its high valuation. According to many, at 26.7 times its annual Q1FY25 earnings, the stock appeared fully priced.
Motilal Oswal said FY25 is expected to be a challenging year for the passenger vehicle (PV) market in India, but it is estimated Hyundai Motor India To register 8% compound annual growth rate (CAGR) in volumes over the next two years. Additionally, it estimates 17% earnings CAGR from FY25 to FY27 after a possible slowdown in FY20.
Comparison with Hyundai Maruti SuzukiIts main rival, Motilal Oswal sees Hyundai having a slight advantage. Hyundai’s technological capabilities, strong financial performance and its premium brand perception give it an edge. The brokerage set a forward price-earnings ratio (PER) of 27x for Hyundai compared to 26x for Maruti Suzuki, leading to their results. 2,345 target price for the stock.
However, there were concerns regarding the IPO. Investors’ skepticism arose from Hyundai’s parent company’s low valuation and substantial undervaluation. Dividend payout of Rs 15,435 crore in FY24 – ten times that of FY23. Additionally, increase in royalty from 2.2% to 3.5% on sales starting June 2024 also weighed on sentiment. Despite these concerns, the IPO managed to attract support from institutional investors on its final day, while other offerings saw oversubscription early on.
From a broader market perspective, Hyundai’s focus on utility vehicles (UVs) provides some optimism. Although total PV sales in India grew only 0.5% year-on-year in April-September 2024, UV sales grew 13.2%. With 67% of its sales coming from UVs, Hyundai is well-positioned to take advantage of this shift in consumer preferences.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We recommend investors to check with certified experts before taking any investment decision.
