Hyundai Motor India Ltd’s December quarter (Q3FY26) results drew a lacklustre reaction from the Street. While Ebitda margin was flat year-on-year at 11.2%, unit economics improved slightly.
Ebitda (excluding other operating revenue) per vehicle increased by 2% to ₹82,067 per vehicle due to the sharp rise in staff costs and other expenses, even as gross profit per vehicle rose faster by about 9% to ₹217,000.
Some of the cost increases can be attributed to the commissioning of a new plant in Pune.
Volumes were lacklustre, with domestic sales flat year-on-year at 1.47 lakh units. In contrast, rival Maruti Suzuki India Ltd’s volumes grew 21% to 5.65 lakh units.
The stock prices mirror this dichotomy in growth. It appears that the gains from the reduction in the goods and services tax (GST) rates were limited for Hyundai, shares of which are now below their closing price before Independence Day, when Prime Minister Narendra Modi initially hinted at a GST rate cut.
During this time, Maruti’s stock has appreciated by 10%, though this is well below the 34% gain it had made at the peak. Maruti ended up as a bigger beneficiary of the GST rate cuts in September by virtue of its small and compact car portfolio that rose by 25%, faster than its overall domestic growth.
For Hyundai, “Entry into the commercial mobility segment, and new launches are yet to translate into meaningful volume growth,” said JM Financial Institutional Securities. “Further, Hyundai Motor India has been losing market share in the domestic market to competitors (11.5% as of Q3FY26 versus 14.6% as of Q1FY25), and pressure is expected to continue due to multiple SUV launches by competitors, a segment in which Hyundai’s flagship Creta is positioned,” it added.
In Q3FY26, exports were the saving grace for Hyundai, up 21% year-on-year to about 49,000 units, aiding the 5% overall volume growth. Can it boost exports? In the earnings call, the management was asked whether India can become an export hub for supplying Hyundai cars to Europe as currently Creta is being supplied to the EU from Indonesia.
As per the management, the India-EU free trade agreement (FTA) does open up opportunities, but they need to study the FTA in detail, as these are early days. Currently, Hyundai exports to the Middle East, Asia, Africa and Latin America but not to the EU region.
Outlook bright?
The outlook for Q4FY26 looks better on volume as well as margin fronts. Hyundai’s January domestic wholesale volumes increased by 11.5% year-on-year, while exports grew 21%, taking the overall growth to 9.5%. Plus, price hikes taken in January should boost profitability. The caveat here, however, is that steel (an important raw material for car makers) prices remain stable.
Nomura’s analysts believe the new model cycle from H2FY27 should help sustain volume growth, forecasting a 24% earnings CAGR over FY26-FY28.
It believes that there is upside risk to their estimates if Genesis, Hyundai’s luxury brand turns out to be a success. For investors willing to bet on the brighter outlook, it helps that the 25% correction from the peak price of ₹2,890 on 22 September has made valuation attractive at 20x of FY28 earnings per share based on Nomura estimates.
