Buy UNO Minda; target of Rs 792: Geojit

Geojit's research report on UNO Minda

UNO Minda Ltd. (UML) is a diversified auto ancillary supplier, manufacturing products such as switches, horns & lights. UML holds a leadership position in the switch business with a market share of 67%. The content per vehicle has continued to grow at 10%-15%, and it is expected to add more components to its product portfolio. The annual order value from EV OEM is Rs.3,292cr. Q2FY24 revenue came above expectations, registering a growth of 26%YoY.This was mainly on account of new customer additions in 2W/4W segment, new contents & leveraging the client base. EBITDA margin came in at 10.9%. However, higher personal costs and low operating leverage due to capacity expansion restricted the margin upside. We expect revenue CAGR to grow by 17% over FY24E-26E, factoring in demand stability, diversification and increase in content per vehicle. Currently, UML is trading at its long term historical avg of 36x. We believe the stock will continue to outperform owing to its diversified portfolio and strong order wins, and value UML at 33x FY26E EPS.

Outlook

The stock has always traded at a premium due to its diversified product portfolio and new product offerings, according to changing trends. We value UML at 33x FY26E EPS, arrive at a target price of Rs.792, and maintain our Buy rating.