Why Hyundai Motor Has Nomura Bullish Despite Q2 Revenue Fall

Hyundai Motor India Ltd.'s strategy is well-positioned for long-term growth, according to Nomura. The brokerage has reiterated its 'buy' rating on the Creta maker, citing an attractive risk-reward proposition backed by the company's strong domestic execution and promising growth prospects.

Despite navigating a challenging environment, the brokerage remains optimistic about the automaker's ability to capitalise on new capacity and upcoming model launches to drive growth over the next few years.

Nomura maintains a target price of Rs 2,472 on the stock, implying a 37% upside from the current market price of Rs 1,804 as of Nov. 12. At a price to earnings ratio which is 18 times the fiscal 2027 value, the stock is seen as very attractively priced compared to its peers, making it one of the best risk-reward opportunities within the Indian auto sector, according to the brokerage.

For the second quarter of the current fiscal, Hyundai's revenue fell 8.3% to Rs 16,876 crore. It profit was also down 16% at Rs 1,338 crore, compared to Rs 1,602 crore in the same period last year. However, revenue was broadly in line with Nomura's estimates.

The company's average selling price saw a slight dip, falling 0.4% sequentially to around Rs 9 lakh per vehicle. However, Ebitda margins remained resilient, coming in at 12.8%, largely in line with the brokerage's forecast.

The company's focus on quality growth through premiumisation, with an increasing mix of SUVs and higher-margin features like sunroofs and advanced driver-assistance systems, is expected to drive expansion.

Hyundai's rural penetration is also improving, with the rural customer mix rising to 21% in the first half of fiscal 2025. First-time buyers, a key demographic for the company, now account for 36.5% of sales, up from 31% in 2019, according to the brokerage.

Even as Hyundai is expected to maintain flat volume growth this fiscal, Nomura sees a robust 8% compound annual growth rate in volumes in the next two financial years.