ICICI Securities has reiterated a BUY call on Hyundai Motor India (HMIL), citing resilient execution in Q3FY26 despite near-term margin pressures linked to capacity expansion. The company delivered steady volume growth, strong SUV-led demand, and robust export traction, even as EBITDA margins moderated sequentially due to commodity inflation and new plant costs. Management’s long-term blueprint—anchored in aggressive product launches, electrification, and exports—targets 1.5x revenue growth by FY30 with sustained double-digit margins. With a target price of Rs 2,550, ICICI sees a compelling risk-reward over a 12-month horizon.

Research House View: BUY with Target Price of Rs 2,550

ICICI Securities – Retail Equity Research has maintained a BUY recommendation on Hyundai Motor India, assigning a 12-month target price of Rs 2,550, implying an upside of approximately 16% from the current market price of Rs 2,200. The valuation is based on 30x P/E applied to the average of FY27–FY28 estimated earnings, reflecting confidence in Hyundai’s structural growth trajectory and margin discipline.

Q3FY26 Snapshot: Volume Growth Holds Firm, Margins Absorb Expansion Costs

Hyundai Motor India reported a steady operational performance in Q3FY26, with total sales volumes reaching 1.95 lakh units, marking a 5% year-on-year increase. Operating income for the quarter rose to Rs 17,973 crore, supported by stable average selling prices of around Rs 9 lakh per unit.

However, EBITDA margins softened to 11.2%, declining 270 basis points sequentially, primarily due to higher input costs, commissioning-related expenses at the new Pune plant, and an adverse product mix. Despite this, profit after tax rose 6% YoY to Rs 1,234 crore, underscoring Hyundai’s ability to protect earnings through scale and pricing discipline.

SUV Dominance Continues to Redefine Hyundai’s Domestic Portfolio

The SUV segment remains Hyundai’s primary growth engine, accounting for nearly 70% of domestic passenger vehicle sales, significantly above the industry average. Models such as Creta and Venue continue to post strong demand, with Creta crossing 2 lakh units in annual sales, reclaiming its position as India’s top-selling SUV.

The company’s alignment with evolving consumer preferences—upright seating, advanced safety features, and technology-led differentiation—has enabled Hyundai to consistently outperform peers in the fast-growing utility vehicle category.

GST Rationalization and Festive Demand Provide Industry Tailwinds

GST 2.0 reforms and festive season demand lifted overall industry sentiment during the quarter. Domestic passenger vehicle volumes hit an all-time Q3 high of 1.27 million units, reflecting a 20.6% YoY increase. Hyundai emerged as a key beneficiary of this trend, aided by its SUV-heavy lineup and strong retail momentum, particularly in December when retail sales surged 16% YoY.

Rural markets also played a pivotal role, with rural contribution exceeding 24% of domestic volumes, highlighting deeper penetration beyond urban centers.

Exports Emerge as a Structural Earnings Stabilizer

Exports continued to provide meaningful volume and margin support, rising 21% YoY and accounting for nearly 25% of total volumes in Q3FY26. Growth was led by strong demand from Middle East, Africa, and Latin America, where Hyundai’s India-manufactured models remain competitively positioned.

Management reiterated that exports will remain a strategic pillar, with selective expansion of models like Venue into overseas markets once domestic supply stabilizes.

Strategic Blueprint: Rs 45,000 Crore Investment to Drive 1.5x Revenue Growth

Hyundai’s long-term strategy outlines an ambitious transformation plan through FY2030. The company has committed Rs 45,000 crore in investments to position India as its second-largest global market. Key pillars include:

26 new product launches, including seven new nameplates

Entry into MPV and off-road SUV segments

Launch of India’s first locally manufactured electric SUV by 2027

Introduction of the Genesis luxury brand in India

By 2030, Hyundai targets 15%+ domestic market share, over 80% contribution from utility vehicles, and more than 50% of sales from eco-friendly powertrains including EVs, hybrids, and CNG.

Margins: Short-Term Compression, Medium-Term Normalization

Near-term margin pressures are viewed as transitory. Management indicated that the Pune plant could exert a ~100 bps EBITDA impact for about a year, until volumes scale up and operating leverage improves. Importantly, discounting has moderated, falling from 3.2% to 2.6% of ASP, while pricing actions taken earlier continue to support profitability.

The company has reaffirmed its 11%–14% EBITDA margin guidance, with sustained double-digit margins expected over the medium term.

Financial Trajectory: Earnings Visibility Improves Beyond FY26

Earnings growth is expected to re-accelerate from FY27 onward, driven by higher capacity utilization, improved mix, export expansion, and gradual easing of cost pressures.

Valuation and Investment Thesis

At current levels, Hyundai Motor India trades at 31.2x FY26E earnings, which ICICI Securities views as justified given the company’s balance sheet strength, near-zero leverage, and long runway for growth. The stock’s EV/EBITDA multiple of 18.7x FY26E is expected to compress as earnings scale.

The Rs 2,550 target price reflects confidence in Hyundai’s ability to convert scale into sustainable profitability, while maintaining leadership across key SUV segments.

Key Risks to Monitor

Slower-than-expected volume growth between FY25–FY28

Prolonged commodity price volatility delaying margin recovery

Delays in ramp-up at the new Pune facility impacting operating leverage

Bottom Line for Investors

Hyundai Motor India stands at the intersection of structural industry tailwinds and company-specific execution strength. While near-term margins reflect expansion-related costs, the strategic roadmap, SUV dominance, and export momentum offer clear earnings visibility. ICICI Securities’ BUY call underscores confidence that Hyundai’s India story is transitioning from cyclical resilience to long-term compounding growth.