Kotak Institutional Equities has upgraded Uno Minda from ADD to BUY and revised its target price to Rs 545 a share. The brokerage said that the recent 15% correction in stock price has made the valuations more attractive.
Even though the near-term prospects for the auto industry appear challenging due to various headwinds, the brokerage firm maintained a positive outlook for the company's medium-term growth potential.
Kotak is confident that the company is in a strong position to outpace the growth of the automotive industry. This is primarily due to four key factors such as the expected increase in content driven by the premiumization trend, the expansion of the product portfolio across segments and powertrain, which is likely to result in an increase in kit value, anticipated market share gains in the lighting and electronics businesses, and the growing order book in the sensors and controller businesses, which is being driven by a focus on localization.
"We continue to remain constructive on the company’s medium-term growth prospects driven by (1) increase in content due to premiumization and addition of newer products and (2) order wins across product segments, including EV, resulting in market share gains", Kotak said in its latest report.
The company recently has taken the decision to terminate its subsidiary, Minda Kosei Aluminium, and merge it with Uno Minda Ltd, following the acquisition of the remaining stake from Minda Kosei Trade and Investment Company & Minda Investments. In addition, the company has also terminated its other existing JVs with the Kosei group, through a share swap.
With Uno Minda now having operational control of Kosei Minda Aluminium, Kotak anticipates a significant improvement in the profitability of the joint venture, due to reduced overhead costs and higher utilization levels. The brokerage continues to hold an optimistic outlook on the growth prospects for the alloy wheel industry, which is expected to be driven by import substitution and an increase in penetration levels in the PV segment.