KR Choksey is bullish on Minda Corp has recommended buy rating on the stock with a target price of Rs 169 in its research report dated September 14, 2017.
KR Choksey's research report on Minda Corp
Company’s Net Sales stood at INR 5,817 Mn which was up by 19% y-o-y but was 10% down from our estimate resulting out of slow growth on account of implementation and anticipation of GST. Growth in revenues was on account of significant increase in system business which grew by 10% and was further boosted by tooling business. EBIDTA stood at INR 443 Mn which decreased by 9.12% y-o-y. EBIDTA margin stood at 7.1%. Employee cost increased by 11.2% y-o-y. Higher spend in R&D, currency fluctuations and GST impact on after market business were the key reasons for decline in EBITDA margins. PAT came in at INR 230.2 Mn which was down by 10.95% y-o-y. Decline in PAT was on account of increase in finance cost due to new investments towards expansion at Minda KTSN and MCL Die casting plant.
We believe, Minda Corp is in a turnaround phase and is gradually improving its operational efficiency. On top-line front Minda corp is likely to mirror the overall growth of the Automobile segment. We believe company’s commitment on bring technologically advanced products coupled with stricter emission norms, should result-in higher healthy top-line growth. At CMP of INR 134, the stock is trading at 30.8x FY17 EPS of INR 4.3, 20.3x FY18E EPS of INR 6.6 and 12.7x FY19E EPS of INR 10.5. Going forward we believe improving automobile sales, especially PV is likely to record a faster growth in coming years. Additionally, company’s products targeting next gen models is likely to command a premium over other auto-ancillary companies. Hence, we reiterate “BUY” on Minda Corp and value the stock at 16x FY19E EPS of INR 10.5 with a target price of INR 169 indicating 28% upside from CMP of INR 134.
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