Market share revival key to drive a re-rating
MSIL’s recent underperformance relative to the Auto index is likely to be driven by 1) near-term underperformance in wholesale and 2) disappointing 3Q performance. However, we believe these concerns seem to be overdone, given that retail demand for MSIL remains healthy, both in cars and UVs, and the same is reflected in its outperformance in retail sales post-GST cut. Further, its near term wholesale has been capped by capacity constraints, which is likely to be addressed from Apr’26 onwards as its new capacity comes on stream. We expect MSIL to outperform industry growth in FY27, aided by its healthy launch pipeline, which includes: 1) a new Brezza variant, 2) the recently launched Victoris and e-Vitara, and 3) at least one more new launch in FY27E. Further, its export momentum is likely to remain healthy as it works towards its medium-term target of 750,000–800,000 vehicles by FY31 – it has already surpassed its FY26 target in Feb26. Further, we expect the increase in input cost pressure to be offset by reducing discounts, improving mix, and normalizing pricing in cars. Overall, we factor in MSIL to post 16% earnings CAGR over FY25-28E. We reiterate our BUY rating on MSIL with a TP of INR17,406, valued at 26x Dec’27E EPS.
