Hyundai Motor India Share Price: Why Nomura Sees 26% Potential Upside In India's Biggest IPO? New Target Price

Hyundai Motor India Share Price: Amidst all the hype over the Mother IPO of India, Hyundai Motor India listing was rather disappointing, at a discount of 1.5% on BSE. Since its listing, the share price has trended in a bearish note. However, brokerage Nomura believes there is potential for about 26% upside in Hyundai from its IPO price. Hence, investors sit tight and wait patiently for a new tide in this new auto stock.

Hyundai Motor India Share Price:

At the time of writing, Hyundai's share price is trading at Rs 1,861.25, down by 1.87% on BSE, with a market cap of Rs 1,51,352.03 crore.

The stock was listed on October 22, 2024, at Rs 1,931 apiece on BSE, and is trading under the 'A' category. Hyundai is the third largest auto giant in terms of market capitalisation.

Since listing, so far, the stock has dipped by over 3.3%. From its IPO price of Rs 1,960, Hyundai is down by 5.4% as against the intraday low of Rs 1854 apiece on October 24.

Hyundai launched India's largest IPO worth Rs 27,870.16 crore, from October 15, 2024, to October 17, 2024. The IPO was subscribed by 2.37 times on the final day.

Why does Nomura like Hyundai stock?

Nomura believes that Hyundai is poised for healthy long-term growth due to its style and technology.

The brokerage estimates India's PV industry to sustain a healthy volume CAGR of 6-8% over the next 5-10 years.

Nomura's note added, "More importantly, customers are increasingly becoming aspirational and willing to pay more for attractive designs and high-tech features. Thus, we believe ASPs should continue to
rise by ~3-5%."

That being said, Nomura sees Hyundai be best-positioned in its PV OEM coverage universe to handle technology transitions as its parent Hyundai Motor Company has globally proven technology in ICE, EVs and hybrids.

Also, in Nomura's view, Hyundai's management has consistently been able to predict consumer trends like the shift towards SUVs and feature-rich cars. Having Indian management on board has been an advantage.

Accordingly, Nomura estimates Hyundai to deliver an ~8% volume CAGR over FY25-27F driven by 7-8 new models (including facelifts) and its EBITDA margins to improve to 14% by FY27F from 13.1% in FY24. It also believes that this be led by improving mix, cost reduction and operating leverage.

Overall, the brokerage estimates HMI to deliver a ~17% earnings CAGR over FY25-27F.

Given its strong growth and high ROE of ~42% (FY27F), it said, "We estimate HMI to trade at 25x FY27F EPS (at the higher end of our expected trading band of 20-25x). This is backed by our DCF valuation as well (Fig. 71 ). Our TP implies 26% upside vs its IPO price of INR1,960." Hence, Nomura has arrived at Rs R 2,472 based on P/E multiple of 25x and attribute it to FY27F EPS.