Buy UNO Minda of Rs 650: Emkay Global Financial

Emkay Global Financial's research report on UNO Minda

For Q3FY23, UNO Minda’s EBITDA grew by 44% YoY to Rs3.4bn, above our estimate due to higher-than-expected revenue and gross margin. Revenue grew by 34% to Rs29.2bn, above our estimates, mainly due to increased revenue in switches and others segments due to ramp-up of new orders. We have increased our FY23/FY24 EPS estimates by 6%/2%, factoring in higher revenue and margin assumptions. Following the revision, we expect FY23E revenue growth to be robust at 36%, and the uptrend is likely to endure with FY23-25E revenue CAGR at 15%, supported by growth in underlying segments and increasing wallet share. Driven by better scale and improved mix, we expect EBITDA margin to expand from 10.7% in FY22 to 11.2% in FY23E and to 12.5% in FY25E. We expect robust revenue performance ahead, underpinned by: 1) a cyclical upturn in underlying PV/2W segments; 2) higher content/vehicle in core businesses, such as switches, lightings, and acoustics; 3) improving presence in alloy wheels, sensors, and controllers; and 4) growing content/vehicle led by EV penetration. Annual order size of EV-specific components has increased by Rs3bn to Rs8.2bn.

Outlook

We believe UNO remains on track to increase its EV division’s revenue from <Rs1bn in FY22 to Rs15-20bn in 5-6 years. We reaffirm BUY with a TP of Rs650 (Rs640 earlier), based on 36x its FY25E EPS (37x Dec-24E earlier). Multiple revision is due to the rollover.