Buy Minda Industries; target of Rs 465: Sushil Finance

“Minda Industries Limited (MIL), the flagship company of the Minda group, manufactures range of automotive components for supplying to global original equipment manufacturers (OEMs). MIL designs, develops and manufactures switches for two and three wheelers and utility vehicles. It also manufactures batteries for two, three and four wheelers and utility vehicles. It enjoys 70.0% market share in the two and three wheeler segment in India.”

“With Industry expected to grow significantly going forward, MIL is strongly positioned to take advantage of this opportunity. The company has eight manufacturing facilities located in Gurgaon, Pune, Hosur (Tamil Nadu), Delhi, Aurangabad and Pantnagar (Uttarakhand). Major clients of MIL include Yamaha, Bajaj, Hero Honda, Mahindra & Mahindra, Toyota, Tata Motors, Ford, Honda, General Motors and John Deere.”

“In FY10, MIL’s revenues increased 31.4% YoY and APAT grew by 50.8% YoY with EPS of Rs 21.8. There is huge growth expected in Auto sector going forward especially two and three wheelers. With Minda commanding market share of more than 70.0% in switches and batteries the future for MIL looks extremely bright. It had significantly expanded in last few years which would help it cater to the increasing demand from Auto majors. Going forward, we expect its Revenues and APAT to grow by 30.0% & 58.7%, respectively in FY11E; and by 15.0% & 33.7%, respectively in FY12E. At the CMP of, the stock is available at an attractive valuation of 8.2x its FY12E earnings of 46.5. We recommend a BUY for a target price of Rs 465 (10.0x FY12E Earnings),” Sushil Finance research report

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