Multi Baggers

Sushil Finance

5.30 AM Jan 1st 1970

UNO Minda

BSE ID : 532539 NSE ID : UNOMINDA

RECOMMENDED PRICE 180.00

PEAK FROM RECO 660.30 266.83%

CURRENT PRICE 728.50 Resource id #12

We recommend a BUY at Rs 181 for a target Price of Rs 321 with a long term horizon. We maintain our positive outlook for the Company with regards to anticipated growth in the auto-ancillary sector, ongoing expansions and strengthening new businesses.

Minda Industries Ltd.

Minda Industries is setting up a new lighting plant at Chennai and some of the operations from its Pune lighting division will be transferred to Chennai. The Chennai plant is likely to begin commercial production from July, 2014. Furthermore, the Company recently witnessed commencement of operations at new switch plant and new die-casting plant at Hosur.

Q2 FY14 Result Highlights

The standalone top-line witnessed a moderate growth of 4.6% YoY to Rs.2,727.5 mn during Q2 FY14, which continued to face the heat of slowdown in the auto sector. The EBITDA margin continued to be under pressure despite significant reduction in cost of raw materials, as a percentage of revenue on account of higher employee benefits costs and other expenditure, as a percentage of revenue. On an annual basis, the EBITDA declined 19.3% to Rs.159.2 mn; however, on the sequential basis, the EBITDA improved 21.3%. The pressure at the operating levels was further carried down to the bottom level as the net margin continued to fall to 1.9%. Similarly, there was some improvement seen on sequential basis. During the quarter, the company registered an EPS of Rs.3.2 as compared to Rs.3.8 in Q2 FY13 and Rs.2.4 in Q1 FY14.

The consolidated H1 FY14 revenue grew 29.5% YoY to ~Rs.8,120.0 mn; however, the EBITDA declined 17.9% YoY to ~Rs.320.0 mn while the net profit witnessed a significant plunge to ~Rs.10.0 mn from ~Rs.130.0 mn in H1 FY13. During the first of half of current fiscal, the company consolidated the figures of Clarton Horn (Spain) which was acquired in Q1 FY14. Thus, there were several write-offs and one-offs relating to the same, which dragged down the performance. During H1 FY14, the extra-ordinary items related to Clarton Horn amounted to ~Rs.30.0 mn and other non-recurring expenses on Hosur Project were ~Rs.50.0 mn. Accordingly, the adjusted net profit considering the above one-offs stood at ~Rs.90.0 mn for H1 FY14.

Other Updates

During H1 FY14, the Electricals and Electronics (E&E) contributed 48% to the consolidated top-line while Chassis & Motors Systems (C&M), Body & Structures (B&S) and Others contributed 27%, 18% and 7%, respectively. The OEMs constitutes 85% of the overall revenue of the company; 57% of the sales came from 2 wheelers while remaining 43% are from 4 wheelers. On the geographical front, the company earned nearly 23% of the revenue from international markets.

The consolidated debt increased from ~Rs.1,830.0 mn in September, 2012 and ~Rs.1970.0 mn in March, 2013 to ~Rs.2,950.0 mn in September, 2013 on account of acquisition of Clarton Horns and working capital requirements. In addition, the Company is also expanding its operations at Chennai, Hosur and Gujarat. However, the company does not have any significant requirement of significant capex in the near terms as most of the requirements have already been met and some of the capex plans have been postponed for the time-being.

The Company received an order in lighting business from OEMs worth ~Rs.520.0 mn. In addition, the Company also received new orders worth ~Rs.300.0 mn in the Switch Division and ~Rs.60.0 mn from the Horns Division. The Company is setting up a new lighting plant at Chennai and some of the operations from its Pune lighting division will be transferred to Chennai. The Chennai plant is likely to begin commercial production from July, 2014. Furthermore, the Company recently witnessed commencement of operations at new switch plant and new die-casting plant at Hosur.

We recommend a BUY at Rs 181 for a target Price of Rs 321. We maintain our positive outlook for the Company with regards to anticipated growth in the auto-ancillary sector, ongoing expansions and strengthening new businesses. In near term, the Company may face margin pressures on account of substantial investments in the existing and emerging product-lines, nevertheless, our long term view for the stock remains intact. We have a BUY rating for the stock with the long term horizon.

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