ICICI Direct's research report on Minda Industries
Minda Industries (MIL) reported a soft Q1FY21 performance. Consolidated revenues were at Rs 417 crore, down 71% YoY (4-W:2-W at 53:47; OEM: aftermarket at 84:16). Indian and global operations were impacted by lockdowns in the Covid impacted quarter. Consolidated loss at EBITDA level in Q1FY21 was at Rs 71.5 crore. Operating loss tracked negative operating leverage, with both employee costs and other expenses rising steeply on percentage of sales basis. Gross margins expanded 200 bps QoQ. Reported consolidated loss after tax for the quarter was at Rs 118.3 crore. Profitability was supported by lower interest & depreciation outgo.
Outlook
Post the sharp stock price run up since our last update, we feel there is limited room for further upside currently. We downgrade MIL to HOLD, valuing it at Rs 370 i.e. 14x EV/EBITDA on FY22E. Investors willing to take fresh exposure to MIL are advised to do so through Harita Seating Systems (HSS; increasing visibility of merger in next six months). Effective buying price given the swap ratio (152 MIL shares for every 100 shares held in HSS) comes to ~Rs 275 - steep 20% discount to current MIL’s current market price.
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