Hyundai Motor India’s stock is set to draw major attention from institutional investors worldwide. The company’s exceptional financial metrics, surpassing those of competitors such as Maruti Suzuki, a subsidiary of Suzuki Motor Corporation, signal a promising outlook. Analysts anticipate Hyundai’s stock trading at a premium, underscoring its superior return ratios and operational prowess.
Outstanding Financial Performance
For FY24, Hyundai Motor India’s Return on Equity (RoE) reached an impressive 29.3%, markedly higher than Maruti Suzuki’s 16.8%, M&M’s 20.3%, and Tata Motors’ PV division’s 20.3%, as reported by IIFL. The Return on Capital Employed (RoCE), excluding cash and investments, hit an extraordinary 149%, dwarfing the 18-53% range of peers. These figures illustrate Hyundai’s operational efficiency and robust financial health.
Optimal Utilization and Expansion
Key to Hyundai’s efficiency lies in its optimal plant utilization. Chennai plants operate near full capacity, with plant one at 103% utilization of its 293,000-unit capacity and plant two at 92% of its 310,000-unit capacity. The Talegaon plant, acquired from GM, will start operations in the latter half of FY26, elevating Hyundai’s total capacity to over one million units. This acquisition will normalize utilization levels, bolstering growth.
Dominance in the SUV Segment
Hyundai’s strategic focus on SUVs has driven its success in India. The SUV segment represented 62% of Hyundai’s domestic sales in the first nine months of FY24, up from 53% in FY23. Over the past five years, the SUV market expanded at an impressive 23% CAGR, significantly outpacing the industry’s 5% CAGR. Hyundai’s average selling price per unit, Rs 8.92 lakh, stands approximately 35% higher than Maruti Suzuki’s, highlighting the value of its SUV-centric portfolio.
Cost Management and Profit Margins
Despite a lower gross margin relative to Maruti Suzuki, Hyundai achieves a higher operating profit margin through efficient cost management. In the first nine months of FY24, Hyundai’s employee costs as a percentage of sales were 2.35%, compared to Maruti’s 3.88%. This efficiency results in superior revenue per employee and sustains an operating profit margin of 12.67%, about 100 basis points above Maruti’s FY24 figure.
Promising Outlook for Investors
Hyundai Motor India’s future appears bright. Strategic investments and operational efficiencies promise sustained growth momentum. Anticipated margin pressures from the new royalty rate of 3.5%, up from 2.3-2.5%, seem unlikely to dampen investor enthusiasm. Hyundai paid Rs 1,174 crore in royalties during the first nine months of FY24, demonstrating its commitment to competitive excellence.
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