Uno Minda Industries, (formerly Minda Industries), is an auto ancillary stock with a market capitalization of ₹29,320 crore. The company is engaged in the business of manufacturing auto electrical parts and components, which include switches, lighting, batteries, blow-moulded products, and other ancillary services related to the auto industry.
The company has seen its shares rise gradually from its March 2020 low of ₹106.65 apiece to the current price of ₹511, delivering a stunning return of 380%. In the last ten years, the stock has returned a whopping 8,750%, growing from ₹5.77 apiece to ₹511.
On the fundamental front, the net profit of the company has been growing steadily for the last six quarters. In the recent December quarter, the company reported better-than-expected numbers, with its consolidated net profit growing by 47.45% to ₹174 crore compared to ₹118 crore for the same period last year. In the previous quarter, the company earned a net profit of ₹182 crore.
During the quarter, the consolidated revenue from operations soared to ₹2,915 crore, a jump of 33.65% YoY from ₹2,181 in Q3 FY22, on account of the diversified product portfolio, rising content per vehicle, and cross-selling of the product among customers.
However, sequentially, the company saw its revenue growth muted at 1.32% due to a drop in production volumes.
In Q3FY23, lower production volumes across all the verticals were attributable to the annual maintenance shutdown of plants at the various OEMs and the recognition of higher sales in Q2FY23 due to the early festive session.
Meanwhile, the company strengthened its relationship with marquee American 2W OEMs with incremental orders for switches as well as heated grips. Recently, it won an incremental order with an annual peak value of ₹300 crore comprising an off-board charger, motor controllers, BMS, and DC-DC converters.
The company has approved a Capex of ₹175 crore to increase the capacity of airbags, which is expected to be completed by December 2024.
The Ministry of Road Transport and Highways has mandated that all passenger cars must have six airbags by October 2023. This new regulation is expected to have a positive impact on the company's growth in the future.
Post the Q3FY23 earnings, domestic brokerage firm, KR Choksey has revised its rating on the stock to "buy" from "accumulate," with a target price of ₹654 apiece, reflecting an upside potential of 28.50% from the stock's latest closing price.
The brokerage stated that the company is continuously focusing on the technological advancement of its capabilities, which enabled them to build a strong relationship with the OEMs.
Consequently, the company is expected to benefit from supplying its products in OEMs new launches. Moreover, the brokerage anticipates some improvement in the coming quarters as the semiconductor chip shortage eases and metal prices fall.
Likewise, another brokerage firm, Geojit Financial Services, has a "buy" rating on the stock with a target price of ₹586 apiece. At current levels, the stock is trading at its long-term historical average of 35x. “We believe the stock will continue to outperform owing to its diversified portfolio and strong order win,” said the brokerage.
Geojit stated that the company beat their revenue estimates in Q3FY23 on account of new customer additions in 2W/4W, new contents, and leveraging the client base.
The company's product diversification and increasing growth from new products give it better visibility on the revenue front. Enacting the auto norms and enhancing safety features will further lead to an increase in kit value per vehicle across the auto segment, it says.
The company is in the process of continuous expansion of its existing product portfolio and the addition of new product lines in alloy wheels, lighting, infotainment, seating, airbags, and blow moulding.
The company’s recent announcement of a JV with Tachi-S Tokyo, Japan, for manufacturing recliner seats for PVs (passenger vehicles), will expand product offerings for EV passengers and PVs as well, the brokerage added.
14 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.