Know Your Stock| Uno Minda won’t be out of business even if IC engines are phased out

UnoMinda's Carot helps a car owner remotely track the vehicle's performance, stressors experienced including bad driving, location and so on. (Image: Uno Minda website)

Auto ancillaries manufacturer Uno Minda has emerged an interesting component in the EV growth story as a credible supplier to most leading auto-makers both in the two-wheeler as well as in four-wheeler segments. The best part is that most of the parts it supplies can go into both IC engine as well as in electric vehicles.

Set up in 1958, Uno Minda is a leading supplier of components to local automakers, constituting 82 percent of its revenue. Overseas automakers make the rest of the topline. Headquartered in Manesar, Haryana, it is spread across the country through 66 factories and 11 research and development (R&D) centres. It has six factories, seven sales offices and four design centres across North and South America, Europe and Asia (excluding India).

Also read: Uno Minda's Q3 revenue up 34% YoY

With a product line of more than 20 items and with 23,000 employees, the company caters to customers across the two-wheeler, four-wheeler and off-road categories. The client list flaunts brands like Bajaj Auto, Honda Motorcycle and Scooter India (HMSI), Hero, Royal Enfield, TVS, Yamaha and BMW in the first category, while Maruti Suzuki, Hyundai, Mahindra and Mahindra (M&M), Toyota, General Motors and Renault feature in the second category; and Eicher, Escorts Kubota, JCB, M&M and TAFE in the third category.

In FY22, the company posted a revenue of Rs 8,313 crore with a 30 percent on-year growth and net profit of Rs 356 crore with a 72 percent growth. In Q3, Uno Minda posted a revenue of Rs 2,915 crore with a 34 percent YoY increase and net profit of Rs 162 crore with a 60 percent YoY rise. Its December quarter EBITDA margin stood at 11.6 percent, which was 82bps higher than what it was a year ago.

The company started as a switch supplier to automotive OEMs (original equipment manufacturers) and now it has captured nearly half of the market share in some of the product categories. It services 65 percent of the market for switches in the two-wheeler category and 55 percent of the market for the same in the four-wheeler category.

Uno Minda is a market leader in India and the second-largest in the world in automotive horns, commanding 45 percent of the market; and is the market leader in four-wheeler alloy wheels business.

The company has been trying to grow its share of auto-component sales beyond its traditional mainstay product, which is switches. Not only is it growing its market share in switches it sells, it is also trying to grab a piece of other components such as lighting, casting, acoustics and seating.

Switches continue to be its leading category, bringing in 28 percent of its revenue as of Q3FY23. The other big product categories are lighting (22 percent) and castings (20 percent). Its larger client segment is the four-wheeler category including tractors (53 percent) and the smaller one is the two-wheeler category (47 percent).

In analyst parlance, the company has been increasing its kit value, or the revenue it derives from every vehicle sold, at a healthy 13-51 percent CAGR across different types of four-wheeler and tractor segments over FY19-21 and by 27-44 percent CAGR across different types of two-wheeler segments, according to Nomura. Its kit value from four-wheelers ranged between Rs 11,830 for tractors and Rs 1,46,416 for SUVs in FY22. Its kit value from two-wheelers ranged between Rs 7,181 for mopeds and Rs 14,261 in premium models. Almost all of its products are engine-agnostic.

The company is also growing its aftermarket business, meaning that it sells in the replacement market, apart from catering to automakers directly. This contributed 10 percent to the company’s revenue in FY22.

Also listen: Four trends to disrupt auto sector in the coming years

The EV transition

To prepare for EV transition, the company has launched an engine-agnostic portfolio, which includes electronic and control systems (charging sockets, cameras, shifters, seat belts, actuators, etc.); safety and comfort systems (steering wheel with airbags, body, energy absorption or EA pads, fuel hoses, etc.); lighting and acoustics (horns, lamps, speakers, etc.); light metal and power train (alloy wheels, casting, air filtration systems, etc.); and batteries (lead acid).

Under its EV product portfolio, battery packs and acoustic vehicle alert systems (AVAS) are being developed to realise a kit value of Rs 26,000, while others such as battery-management system (BMS), smart plug, RCD cable and body-control module are being produced and supplied towards a kit value of Rs 27,300. Overall, Uno Minda sees an EV Kit Value potential of Rs 61,300 from its two-wheeler and three-wheeler clients.

In a major move to profit from electrification, Uno Minda has entered into a joint venture with FRIWO, a German manufacturer of power-supply solutions and e-drive solutions.

For FY22, the company received EV orders worth more than Rs 400 crore, which was around 4.8 percent of its revenue that year. In FY23, the company’s EV orders have doubled YoY to touch Rs 980 crore.