Hyundai Motor vs Maruti Suzuki: Which auto stock can drive long-term returns for your portfolio?

The auto space has been in focus amid the launch of India's biggest initial public offer (IPO) by Hyundai Motors India, followed by its listing on Tuesday, October 22.

With the auto major making its stock market debut, a key question for long-term investors is which passenger vehicle company should they choose for the long term — Hyundai Motor or Maruti Suzuki?

Hyundai Motor Stock Price Trend

Shares of Hyundai Motor made a muted debut on the bourses on October 22 as they listed at ₹1,934 on NSE, a discount of 1.3 per cent to the issue price of ₹1,960. Meanwhile, on BSE, the stock was listed at ₹1,931, down 1.5 per cent. However, the stock ended over 7 per cent lower than its issue price at ₹1.820.40 in the previous session.

In intra-day deals on Wednesday, October 23, Hyundai shares climbed 6 per cent to the day's high of ₹1,928.15. 

The IPO, valued at ₹27,870.16 crore, is India's largest public offering to date. It was open for subscription from October 15 to October 17. The public offer was priced in the range of ₹1,865-1,960 per share. Following the three days of bidding, the Hyundai Motor IPO closed with a decent but less-than-anticipated demand, garnering 2.37 times bids. The retail investor and non-institutional investors segments were not fully subscribed in the three days of bidding. The IPO was entirely an offer for sale (OFS) of 14.22 crore shares with no fresh issue component.

Meanwhile, Maruti has posted a decent performance in the last one year, with the stock price climbing 13.5 per cent. In 2024 so far, India's biggest automaker's stock has risen 16 per cent. It has shed around 10 per cent in October so far after a 6.7 per cent rise in September. 

As of its previous close of ₹11,920.90, the auto stock is around 13 per cent away from its peak of ₹13,675, hit in August 2024. Meanwhile, it has advanced over 22 per cent from its 52-week low of ₹9,738.40, recorded in January 2024.

Hyundai Motor vs Maruti Suzuki: Which is a better bet?

When considering long-term investment options between Hyundai Motor India and Maruti Suzuki, experts present varying viewpoints. Both automotive giants have solidified their presence in the Indian market but each faces unique opportunities and challenges. Let’s delve into the details.

Mumuksh Mandlesha, Research Analyst, Anand Rathi Institutional Equities prefers Hyundai over Maruti. Over the long term, Hyundai can do well in terms of growth due to a favourable SUV mix (Hyundai 63 per cent vs Maruti 36 per cent), he opined. 

“SUVs are expected to grow faster in comparison to hatchbacks, which would support structurally better growth over the longer term. But as seen in FY24 or YTD FY25, there has been hardly any difference in their growth due to better model launches by Maruti, which indicates the importance of model launches as they can change the view over the medium term. In terms of return ratio profile as well, Hyundai stands out versus Maruti,” Mandlesha added.

Domestic brokerage Emkay, however, has 'reduce' calls on both the auto majors but sees more downside in Maruti. It has a target price of ₹11,200 for Maruti, implying a 6 per cent downside while its target for Hyundai is ₹1,750, suggesting a downside potential of 4 per cent.

Emkay initiated coverage on Hyundai Motor India (HMIL) with a "REDUCE" rating and a target price of ₹1,750, valuing it at around 23x core Sep-26E PER, similar to Maruti Suzuki (MSIL). Despite HMIL's strong presence in India, a modest 5 per cent EPS CAGR over FY24-27E is expected due to limited major launches, muted capacity growth, higher royalty costs, and lower treasury income. Emkay prefers MSIL over HMIL, citing MSIL's more diversified product and powertrain mix, higher growth potential, and stronger revenue and EPS CAGRs, driven by factors like small-car recovery and new model launches.

The brokerage noted that Hyundai Motor India outperformed Maruti Suzuki in profitability, driven by a stronger mix and premium positioning, though this was offset by lower scale. Hyundai is investing ₹320 billion to develop EV manufacturing and supply chains in Tamil Nadu and Maharashtra. The company's focus on high localisation levels and the introduction of an EV-specific platform are expected to reduce costs and enhance price competitiveness, according to the brokerage's analysis.

Meanwhile, brokerage house Motilal Oswal has a buy call on both the auto majors but sees more upside in Hyundai than Maruti. It has a target price of ₹15,160 for Maruti, implying a 27 per cent upside while its target for Hyundai is ₹2,345, suggesting an upside potential of 29 per cent.

Motilal Oswal highlighted Hyundai Motors India's (HMI) strong market presence, covering 87% of India's passenger vehicle (PV) market. With dominant shares in key segments, including mid-size and compact SUVs, HMI benefits from its parent Hyundai Motor Company’s support in R&D and supply chain, it said. HMI, India’s second-largest PV exporter, is well-positioned for growth, with a projected 17% EPS CAGR from FY25 to FY27. MOSL assigns a slight premium to HMI over Maruti Suzuki, citing technological prowess, strong financials, and alignment with industry trends.

Meanwhile, it expects Maruti to maintain its dominance in the passenger vehicle (PV) market and continue outperforming industry growth in FY25. With SUVs now comprising 50 per cent of the PV market, MSIL's expanded lineup, including the Invicto, Brezza, and Fronx, strengthens its position, MOSL said. By FY31, MSIL aims for 15 per cent of its domestic sales to come from battery electric vehicles (BEVs) and 25 per cent from hybrids. The brokerage said that while the majority of input cost benefits are likely to be over, Maruti Suzuki India is expected to achieve a 140 basis point margin improvement to approximately 13 per cent by FY26. It projects a 15 per cent earnings CAGR over FY24-26E, driven by improved product mix and potential government policies benefiting hybrids.

In summary, the choice between Hyundai Motor India and Maruti Suzuki for long-term investment hinges on different growth prospects. Hyundai's strength in SUVs and its focus on electric vehicles (EVs) positions it for strong future growth. Maruti Suzuki, on the other hand, retains market dominance with a diverse portfolio and upcoming launches, especially in small cars and hybrids.Overall, Hyundai’s SUV and EV focus may offer better long-term growth, while Maruti’s market leadership ensures steady performance.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.