Brokers say buy Minda Industries, target price of Rs 310

747 Investors following Minda Ind. Share this News with them.

0

Like this story, share it with millions of investors on M3

Brokers say buy Minda Industries, target price of Rs 310

Broking houses are bullish on Minda Industries, MIL. Kotak Securities has initiated coverage on the company with a 'buy rating'. It has target price of Rs 310.

Post your opinion here

 

0

Tweet

Share on Tumblr

Broking houses are bullish on Minda Industries , MIL. Kotak Securities has initiated coverage on the company with a 'buy rating'. It has target price of Rs 310.

The report by Kotak Securities says that, "Minda Industries is a value and growth story. The company is the largest domestic player in the automotive switches space with a market share of 60%. MIL has the best speed to market ability, a multi-locational capacity presence, long standing relationships with large OEMs and adequate management bandwidth."

The report lists out several investment rationales, these are below: -

"MIL is India's largest player in the domestic automotive switching solutions business. It is a 100% OEM Tier 1 supplier to almost all the two-wheeler players and selected tractor OEMs. About 78% of MIL products come from OEM sales, 18% come from replacement, and the rest from exports."

"Exports are expected to grow significantly, both for MIL and the group. The group is expecting a 25% share of exports in total turnover of Rs 10 billion by FY08. MIL's exports are also expected to rise from 3% to 10%
of sales by FY08E."

"MIL intends to consolidate its market share in the two-wheeler and tractor segments. We estimate the motor cycle market to grow 18% yoy and tractors market by 15% yoy for FY06E on the back of increased agricultural activity and greater penetration of vehicle financing."

"MIL's JV with the Italian major Fiamm SpA in auto acoustics is expected to give a boost to exports, entry into the four-wheeler segment and improved visibility among the larger OEMs like Skoda, Daimler Chrysler, Fiat, Audi, Renault and Honda."

"Our estimation of MIL's consolidated revenues is Rs 2.69 billion in FY06E and Rs 3.43 billion in FY07E. Consolidated EBIDTA are estimated at Rs 382 million and Rs 496 million in FY06E and FY07E respectively as compared to a standalone EBIDTA of Rs 287 million in FY05."

However, the report also mentioned investment risk, which is below: -

"Any significant downturn in the domestic two-wheeler and tractor markets could impact MIL's earnings negatively."

About the company's valuations, the report says, "With the EPS CAGR estimated at 36% over FY05-07E, the topline CAGR at 33% over the same period, RoE and RoCE at 42% & 25% in FY06E, EV/ EBIDTA at 8x and 6x in FY06E and FY07E respectively, we believe that the present valuations of 16x FY06E and 12x FY07E look attractive. We recommend a Buy on the stock with a target price of Rs 310. At our target price, the stock will be valued at 20x and 15x P/E and 12x and 9x CEPS for FY06E and FY07E respectively."