Brokerage Houses Positive For Long Term

The initial public offering (IPO) of Hyundai India has captured the attention of investors and analysts alike as it opens for subscription. The company aims to raise INR 27,870.16 crore through this offering, and several brokerage houses have provided their recommendations based on their analyses of the company’s financial health and market potential. Here’s a summary of Hyundai India IPO recommendations by major brokerage houses.

Hyundai India IPO Recommendations

Analysts at Aditya Birla Money have recommended that investors with a view of long-term tolerance might consider applying for the Hyundai India IPO. Hyundai has consistently grown stronger and has been one of the most recognized brands in India since its inception and has been the first-mover in various PV categories. We believe that the outlook for Hyundai continues to be strong owing to its strong parentage and leveraging HMC’s technology and R&D capabilities and strong balance sheet. However, at the upper price band, Hyundai is available at a rich valuation of 26x its FY24 EPS, leaving little on the table for investors. We have a SUBSCRIBE recommendation to this issue for a long term.

Anand Rathi has assigned a “subscribe long term” rating to the Hyundai Motor India IPO. At the upper band, the company is valuing at 26.2x its FY24 earnings along with being valued at 26.7x if we annualize FY25 earnings. Following the issuance of equity shares, the company’s market capitalization stands at ₹15,92,581 million, with a market cap-to-sales ratio of 2.28 based on its FY24 earnings. We believe that the issue is fully priced and recommend “Subscribe – Long Term” rating to the IPO.

Hyundai India IPO recommendations saw another positive view from Canara Bank Securities. Analyst Sankita V noted that HMI contributes only 6.5% to global revenues and 8% to profitability, Hyundai Motor India is expected to be valued at approximately 42% of its parent company’s market capitalization. Furthermore, its P/B ratio stands at an expensive 14.93x. Despite the company’s growth potential and strong market presence, the issue comes with higher valuations. The P/E ratio of 26.28x is above the industry average of 24.41x and far higher than its parent company Hyundai Motor Global’s P/E of 5x. • However, HMI boasts industry-leading return ratios, with a RoE of 56.82% and RoCE of 62.9%, significantly surpassing the listed peer averages of 23.25% and 21.85%, respectively. We recommend to SUBSCRIBE this issue for long-term gains,” opined the analyst.

ICICIdirect has issued a clear “subscribe” recommendation for the Hyundai IPO. In their analysis assign SUBSCRIBE rating on HMIL given steady growth prospects amid industry tailwinds, robust financials & healthy SUV product slate. We expect limited listing gains to this IPO, however expect HMIL to deliver healthy double-digit portfolio returns over medium to long term.

Another positive word among Hyundai Motor IPO recommendations came from brokerage firm Arihant Capital which suggested that investors with a medium risk appetite subscribe to the upcoming IPO as a long-term investment. Hyundai has ensured to maintain stable share market in India historically. It enjoys loyalty among the Indian consumer base owing to smooth and affordable after sales service. Equipped with R&D from Korea and an automated factory in Chennai, company has been able to optimise its operations while expanding it’s distribution. Hyundai also plans to gradually become a major player in the EV segment. Company has also recorded one of the highest RoNW among its peers. We believe the company can take advantage of the growing PV market in India with its diverse offerings. At the upper price band of INR 1960, the issue is priced at a P/E of 26.3x post issue based on the FY24 EPS of INR 74.58. We have a “Subscribefor long term” rating for the issue.

SBI Securities – Subscribe for long-term

Analysts at SBI Securities noted that HMIL has the 2 nd largest market share in the Indian PV industry after Maruti Suzuki and is also the 2 nd largest exporter of cars from India. SUVs(higher margin vehicles) contribute a large share of the company’s volumes which reflects in the relatively higher material and operating margins as well as return ratios. Strong brand, blockbuster models such as Creta, Alcazar, Venue and Verna, advanced technology and high export potential are key differentiators. The capacity expansion at Talegaon will help HMIL in ramping up both domestic and export volumes. At the upper price band of Rs 1,960, HMIL is valued at 26.3x FY24 EPS. We recommend subscribing to the issue for long term investment horizon.

Chola Securities is also positive on the upcoming IPO.

Hyundai Motors India (HMI) Ltd. is the third-largest OEM in the global passenger vehicle market and the second-largest in the Indian domestic market since 2019.
Having strong parentage from Hyundai Motors Company in South Korea, HMI effectively leverages new technologies to enhance operational and manufacturing efficiency.
As of June 30, 2024, HMI Ltd holds a 14.6% market share in the passenger vehicle segment, due to its extensive product offerings.
The company is planning to expand its EV portfolio by launching 4 new models including Creta EV by Q4FY25.
Post issue the promoter shareholding will come down to 82.5%, indicating further dilution in future.
The IPO is reasonably priced with a post-issue PER of 26.3x, in line with its peers, and a return on equity of 56.82% (FY24).
We recommend a “SUBSCRIBE” rating for Hyundai Motors India Ltd’s IPO.

Hyundai India IPO Recommendations – Bottomline

In conclusion, brokerage houses are generally optimistic about the Hyundai Motor India IPO, recommending subscriptions based on varying risk appetites and investment horizons. While some firms advocate for long-term investments due to growth potential, others emphasize caution due to market volatility and company size considerations.

In addition, there is a strong premium in the informal or grey market, reflecting listing with potential gains of 3.8%. Nevertheless, investors are encouraged to assess their individual risk profiles and conduct thorough research before participating in this IPO.

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