Buy Minda Corporation; target of Rs 125: Dolat Capital Market

Dolat Capital Market's research report on Minda Corporation

Minda Corp reported better than expected numbers in 3Q. Revenue grew 36% YoY driven by strong aftermarket (+55% YoY) and export sales (+25% YoY). EBITDA grew 13% YoY with margin at 11% (+90bps QoQ/-231bps YoY), benefit of operating leverage was offset by high RM cost. Net profit grew 11% YoY suppressed by higher interest cost and lower other income. Mechatronics business grew 32% YoY supported by higher aftermarket and exports sales. However, margin contracted 250bps YoY to 13.8% led by weaker product mix and commodity inflation. Although Information & Connected Systems (wiring harness business) jumped 43% YoY in 3QFY21 supported by increase in content per vehicle for 2W due to BS VI, margin suppressed 170bps YoY to 7.1% to due to increase in copper prices and weaker mix.

Outlook

Given the strong revenue growth in Wiring harness business and Mechatronics business, QoQ improvement in margin and sharp improvement in JV profitability, we change our rating from Reduce to BUY with target price Rs 125 (17xFY23E EPS).

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