Hyundai Motor India shares will fall below their IPO price, BofA Securities warns

Shares of Hyundai Motor India Ltd. are trading with gains of 1% on Thursday, December 5.

Brokerage firm BofA Securities has initiated coverage on Hyundai Motor India with an ‘Underperform’ rating and a price target of ₹1,840 per share, suggesting a potential downside of about 2% from Wednesday’s closing levels.

In its note, the brokerage highlighted Hyundai’s strong franchise, which holds a 14% market share, solid backing from its parent company, and a focus on premium and SUV segments.

However, BofA Securities has expressed caution due to several factors:

1. A slowdown in the passenger vehicle (PV) market, especially in metropolitan areas,

2. A pause in the premiumization trend, and

3. Ongoing capacity constraints.

The brokerage also noted a lack of catalysts like new model launches or significant market share gains in the near term.

Additionally, BofA Securities finds the risk-reward profile unattractive, citing Hyundai’s valuation at 25 times its FY26 price-to-earnings ratio and an expected earnings per share CAGR of just 4% from FY24 to FY27.

Hyundai Motor India reported its September quarter results on November 12, which were lower on a year-on-year basis on all parameters.

The South Korean automaker’s India unit posted a 16% drop in its overall net profit to ₹1,375 crore for the September quarter. Revenue for the quarter also declined by 8% to ₹17,260 crore compared to last year.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) fell by 10% to ₹2,205, while margin narrowed by 30 basis points on a year-on-year basis to 12.8%.

Last week, two foreign brokerages Morgan Stanley and JPMorgan initiated coverage on the stock with both dishing out an ‘Overweight’ rating.

Out of the 12 analysts that have coverage on Hyundai Motor India, nine of them have a ‘Buy’ recommendation, while three of them have a ‘Sell’ rating. All three sell recommendations have price targets below IPO price.

Shares of Hyundai Motor India Ltd. are currently trading a percent higher on Thursday at ₹1,889.20. The stock is down 4% below its IPO price of ₹1,960 per share.