Buy UNO Minda; target of Rs 650: Emkay Global Financial

Emkay Global Financial's research report on UNO Minda

We interacted with Chairman Nirmal Minda and visited Minda company plants. Management reiterated that Minda is well-placed to outpace the underlying industry, thanks to the increasing content per vehicle (CPV), market-share gains and EV adoption. Minda expects to do well in both, core segments and new products, supported by a strong order-book. Potential CPV in E-2Ws stands at Rs61,300, with an annual order-book of over Rs10bn. We believe the company remains on track to increase its EV division’s revenue to Rs15-20bn in 5-6 years. We expect FY23E revenue growth to be robust at 33%, and the uptrend is likely to endure, with FY23-25E revenue CAGR at 18%, underpinned by: 1) a cyclical upturn in the underlying PV/2W segments; 2) higher content-per-vehicle in core businesses, such as switches, lightings and acoustics; 3) improving presence in alloy wheels, sensors, and seatings; and 4) growing content/vehicle, led by EV penetration.

Outlook

We build-in earnings CAGR of 43% over FY22-25E. ROIC should expand from 11% in FY22 to 24% in FY25E, driven by improved profitability in both, core and emerging segments. After annual capex of Rs7.3bn in the next three years, average annual FCF is likely to be robust at Rs4.6bn. We recommend BUY on the stock, with DCF-based TP of Rs650/share, based on 37x Dec-24E EPS.