Hyundai Motor India Ltd. (Hyundai India) has filed for an IPO with SEBI, revealing detailed business insights in its DRHP. This move has piqued the interest of investors, especially in comparison to the well-established Maruti Suzuki. Let’s delve into the details and understand the key aspects of Hyundai India IPO.
Hyundai India IPO Details
Hyundai India IPO marks a significant step for the company. As per the information provided, the company’s EBITDA margin has increased by 230 basis points to 12.7% since FY21. Last year, Hyundai sold 770,000 vehicles, about one-third of Maruti Suzuki’s sales.
Key Metrics
- Investment Dates: To be announced
- EBITDA Margin: 12.7%
- Vehicle Sales: 770,000 (last year)
Maruti Suzuki’s profitability is higher due to three main reasons: lower depreciation, higher other income, and lower taxes. Compared to Hyundai, Maruti has a lower property, plant, and equipment ratio and a lower tax-to-PBT ratio. Consequently, Maruti’s profits surpass Hyundai’s despite Hyundai having a higher EBITDA margin by 110 basis points.
Strong Export Growth
Hyundai India witnessed a remarkable 60% surge in exports in FY21, accounting for 24% of its total sales. The company’s market share in the Middle East and Europe doubled to around 12%, positioning it strongly in these regions. Europe, in particular, has become a lucrative market due to bans or higher duties on Chinese products, offering a significant profit opportunity for Hyundai and other companies.
Export Highlights
- Export Increase: 60%
- Total Sales from Exports: 24%
- Key Markets: Middle East and Europe
In comparison, Maruti’s export stood at 10% in FY24, with plans to export 300,000 vehicles in FY25. Currently, Maruti sells its products in over 100 countries.
Market Share Dynamics
A significant achievement for Hyundai India has been maintaining the second position in market share, especially amid tough competition from Tata Motors and Mahindra & Mahindra. In FY24, Hyundai’s market share was 14.6%, bolstered by multiple vehicle launches. The anticipation for the electric version of the Hyundai Creta has been high, and the company plans to launch 3 to 4 more electric vehicles in the coming years.
Market Share Insights
- Market Share (FY24): 14.6%
- Upcoming Electric Vehicles: 3 to 4 models
Meanwhile, Maruti Suzuki has launched several SUVs, increasing its market share to 41.7% in FY24, despite a significant decline over the past few years due to weak sales of smaller cars and delayed entry into the SUV segment.
Hyundai India Valuation
Hyundai’s Return on Equity (ROE) was 22.2% for FY24, higher than Maruti’s 15.7%. Although the exact details of the total issue size and valuation are not yet available, sources suggest that Hyundai Motor India’s total valuation could be around $25 billion (₹2 lakh crore).
Valuation Comparison
- Hyundai ROE (FY24): 22.2%
- Maruti ROE (FY24): 15.7%
- Hyundai Expected Valuation: $25 billion (₹2 lakh crore)
Given this valuation, despite Hyundai’s profits and revenue, its market cap-to-profit ratio stands at 45x compared to Maruti Suzuki’s 30x. In terms of revenue, Maruti Suzuki is at 3x while Hyundai is at 3.8x. Using Maruti’s 3x sales metric, Hyundai’s market cap would be ₹2.07 lakh crore, translating to a share value of ₹2,563. This valuation implies an EPS of ₹72 per share and a P/E ratio of 36x for FY24, higher than Maruti Suzuki’s 29x.
Future Prospects
Moving forward, Hyundai’s higher P/E ratio places significant focus on its upcoming product launches and how it addresses product gaps. Hyundai is unique as its exports constitute a quarter of its total sales, whereas Maruti’s exports account for 10%, and Tata Motors and Mahindra & Mahindra are in single digits.
Future Focus
- Product Launches: Critical for future valuation
- Export Strategy: A key differentiator for Hyundai
In conclusion, the Hyundai India IPO presents an exciting investment opportunity with significant growth potential. With strong export performance, a higher EBITDA margin, and ambitious plans for electric vehicles, Hyundai India is well-positioned to compete with industry leaders like Maruti Suzuki. Keep an eye on Hyundai India IPO for a promising addition to your investment portfolio.
