Minda Corp Q2 Results Review - Ebitda Inline; Orderbook Remains Strong: Axis Securities

Axis Securities Report

Minda Corporation Ltd.'s reported Q2 FY24 numbers largely in line with our estimates. Revenue (inline) grew by 4%/11% YoY/QoQ, led by increased production volumes in the passenger vehicle/three-wheeler/commercial vehicle segment, partly offset by lower volumes in the two-wheeler/tractor industry and weak exports.

Minda Corp reported Ebitda of Rs 131 crore (inline), up 6%/15% YoY/QoQ and Ebitda margins (inline) grew by 18 basis points/31 bps in YoY/QoQ. Profit after tax was reported at Rs 59 crore (6% beat), up 2%/30% YoY/QoQ on account of lower depreciation and marginal profits in associates/subsidiaries (against our estimates of Rs 2 crore loss).

Outlook:

We continue to like the company’s growth story driven by increasing kit per vehicle and its focus on electric vehicle. With a strong order book and the management’s confidence in outpacing industry growth (organic/non-organic); we estimate a compound annual growth rate of 16%/22%/16% in revenue/Ebitda/PAT over FY23-26E.

(In February-23, Minda Corp acquired a 15.7% stake in Pricol from the open market for Rs 400 crore and has filed a CCI application for increasing a stake up to 24.5%; the matter remains pending.

Return on the capital allocated towards this investment, and future strategic intent will be the major near-term trigger/risk for the share price trajectory).

Valuation and recommendation:

We the stock at 20 times September- 25 earning per share (roll forward from June- 25 EPS) as it will be a key beneficiary of product premiumization, EV growth, increased business from commercial vehicle/passenger vehicle OEMs and growth opportunities via organic and inorganic routes in the future; We arrive at a target price of Rs 375/share implying an upside of 11%.

Key risks to our estimates and target price

• Lower than expected two-wheeler/PV/CV industry demand.

• Macroeconomic headwinds on global demand

• Government regulations on EVs.

• Investment in Pricol and other strategic investments not generating a return on capital leading to inefficient capital allocation.

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