Maruti Suzuki share price falls as Emkay retains 'Reduce' call ahead of Hyundai Motor India IPO

Emkay Global Financial Services Ltd, has maintained its'reduce' stance on Maruti Suzuki India Ltd, with unaltered estimates and a target price of ₹11,200. According to the brokerage's analysis, Hyundai Motor India outperformed Maruti Suzuki in terms of profitability due to a stronger mix (about 63% contribution from SUVs vs. around 25% for Maruti Suzuki) and premium positioning, albeit this was largely offset by lower scale.

Hyundai Motor Co's, Indian subsidiary, Hyundai Motors India filed Draft Red Herring Prospectus (DRHP) on Saturday, June 15, for a Mumbai stock market listing. The Hyundai Motor India IPO is completely offer for sale (OFS) of 14.21 crore shares of face value of ₹10 each where the South Korean parent is selling up to 17.5% of the firm.

Also Read: Hyundai Motor India IPO: How the auto major compares with listed peers on valuation, key financial metrics

On Tuesday's session, Maruti Suzuki share price slipped over 2% on the BSE. According to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, Maruti Suzuki share price is down around 1.5% today, and we are seeing above-average volume in today's session. With Black Body Marubuzo candlestick formation, prices are under pressure right from opening levels. In the near term, there may be further weakness as long as we don't surpass the morning open high of ₹12,883, and on the downside, support is at ₹12,340.

According to the domestic brokerage house's research, Hyundai Motor India's DRHP highlights a continuous focus on premiumisation. For Hyundai, the percentage of passenger vehicles (PVs) costing more over ₹1 million increased to 49% in 9MFY24 from 32.4% in FY21, while volume contribution from SUVs increased to 53% in FY23 from 45% in FY21.

The business plans to retain its premiumisation focus (SUVs and mid-high range PVs) through focused model releases across price ranges and powertrains. This would also apply to electric vehicle (EVs), with the eventual introduction of EV vehicles in each price class; Hyundai has four EV model releases planned, including the electric Creta in Q4FY25.

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“The company is taking steps to develop EV manufacturing in India along with related supply chain across Tamil Nadu and Maharashtra with ₹320 billion investment commitment (outlined in aggregate). The focus on high localisation levels in EVs, along with introduction of EV-specific platform, is expected to help reduce costs and improve price competitiveness," the brokerage said.

Hyundai India receives significant parentage support from Hyundai Motors internationally in areas such as management, R&D, design, product planning, production, supply chain management, and so on. It also benefits from significant synergies throughout the group's value chain, including supply, production, and product development, with over 90% local sourcing as of last year. As of CY23, India was one of the top three contributors to Hyundai's global sales volumes, accounting for 18.2% vs 15.5% in CY18.

Hyundai seeks to sustain capacity utilisation over 90% (vs. about 97% as of Dec-23), by optimising the domestic and export mix. The company plans to establish India as an export centre for growing markets such as South Asia, Latin America, Africa, and the Middle East.

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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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