Hyundai Motor India Sees Strong Recovery After Weak IPO Debut: Analysts Remain Bullish Despite Market Concerns
Hyundai Motor India’s stock experienced a sharp recovery on Wednesday, October 23, following a disappointing market debut the previous day. The stock, which had seen a decline of 5 percent on its listing day, surged by 6 percent, reaching a high of ₹1,928.15 during the day. This turnaround came after the stock had closed at ₹1,845 on the National Stock Exchange (NSE) and ₹1,846.95 on the Bombay Stock Exchange (BSE) on its first day, listing at a 1.3 percent discount to its issue price of ₹1,960.
By 1:10 pm on October 23, Hyundai Motor India’s shares were trading in the green, showing a 4.81 percent rise and reaching ₹1,907.95 on the BSE. Despite the weak debut, several market analysts and brokerages remain optimistic about the stock’s long-term potential, with some issuing strong buy recommendations and setting higher target prices. This positive outlook reflects confidence in Hyundai Motor India’s fundamentals, even though its initial market performance was underwhelming.
Hyundai’s Market Debut and Performance
Hyundai Motor India’s stock faced a lackluster debut, ending 7 percent below the upper range of its initial public offering (IPO) price band. Analysts had anticipated this underperformance due to concerns over the stock’s high valuation. At 26.7 times its annualized earnings for the first quarter of FY25, many believed the stock was already fully priced. As a result, market enthusiasm on the listing day was dampened, and the stock closed lower than expected.
Despite the rocky start, Hyundai Motor India’s recovery on October 23 points to underlying optimism about the company’s future. Several major brokerages had already initiated coverage of the stock ahead of its listing, with most issuing positive ratings. For instance, Nomura gave the stock a ‘buy’ rating with a target price of ₹2,472, while Macquarie assigned an ‘outperform’ rating with a target price of ₹2,235. These ratings reflect the belief that Hyundai Motor India’s long-term prospects are strong, despite short-term fluctuations.
Analyst Outlook and Forecasts
Motilal Oswal, one of India’s leading brokerage firms, also issued a ‘buy’ rating on Hyundai Motor India’s stock, setting a target price of ₹2,345. This reflects a favorable view of the company’s prospects, particularly in comparison to its primary competitor, Maruti Suzuki. Motilal Oswal highlighted Hyundai’s strong technological capabilities, its premium brand positioning, and solid financial performance as key factors that give the company an edge over Maruti Suzuki. According to the brokerage, Hyundai’s forward price-to-earnings ratio (PER) of 27x is slightly higher than Maruti Suzuki’s 26x, which justifies its higher target price.
However, not all analysts are bullish on Hyundai’s stock. Emkay, another brokerage, issued a ‘reduce’ rating with a target price of ₹1,750. This more cautious outlook stems from concerns about Hyundai’s high valuation and potential challenges in the automotive market in the near future. Emkay’s assessment reflects skepticism about the stock’s ability to deliver strong returns in the short term, despite its longer-term growth potential.
Motilal Oswal acknowledged that FY25 could be a challenging year for the Indian passenger vehicle (PV) market as a whole, including Hyundai Motor India. However, the brokerage remains optimistic about Hyundai’s ability to navigate these challenges. It projects an 8 percent compound annual growth rate (CAGR) in vehicle volumes over the next two years, along with a 17 percent earnings CAGR from FY25 to FY27. This projection assumes that the company will experience a moderation in earnings in FY25 before bouncing back with strong growth in subsequent years.
Competitive Landscape and IPO Concerns
Hyundai Motor India’s listing coincides with a highly competitive landscape in the Indian automotive market. Maruti Suzuki remains the dominant player, but Hyundai has consistently positioned itself as a strong competitor. Hyundai’s technological advancements, product innovations, and strong brand perception have helped it capture a significant share of the market. The company’s premium brand image and focus on high-quality vehicles have also given it an edge in the growing segment of consumers seeking more than just basic transportation.
However, there were several concerns surrounding Hyundai’s IPO that weighed on investor sentiment. One of the major concerns was the valuation of Hyundai’s parent company, which was lower than expected. Additionally, Hyundai’s substantial ₹15,435 crore dividend payout in FY24—ten times larger than in FY23—raised questions among investors about the sustainability of such payouts. Another concern was the planned increase in royalty payments from 2.2 percent to 3.5 percent of sales starting in June 2024. These factors contributed to some hesitation among investors, particularly retail participants, despite strong institutional interest.
Despite these concerns, Hyundai Motor India’s IPO managed to attract significant support from institutional investors on its final day. While the IPO did not see the early oversubscription that some other high-profile offerings have experienced, the backing of institutional investors helped the company achieve a successful listing. This support is seen as a positive indicator of confidence in Hyundai’s long-term potential, even if the short-term outlook is more uncertain.
Conclusion
Hyundai Motor India’s stock has shown resilience following a challenging debut, with a strong recovery on October 23 after a 5 percent decline on its listing day. While concerns about valuation and market conditions persist, several brokerages remain bullish on the stock’s future, issuing positive ratings and setting ambitious target prices. With Hyundai’s strong technological capabilities, premium brand image, and a favorable growth outlook, the company is well-positioned to maintain its competitive edge in the Indian automotive market.
However, investor caution remains, particularly with regard to the company’s high valuation and the challenges facing the Indian passenger vehicle market in FY25. As Hyundai navigates these challenges, its ability to deliver strong financial performance and capitalize on growth opportunities will be key to its long-term success. The company’s recovery in stock price and strong institutional support suggest that it has the potential to emerge as a strong performer in the coming years, despite short-term volatility.