Target: ₹750

CMP: ₹552.30

Uniparts India’s (Uniparts) revenue declined 18 per cent y-o-y and was 9 per cent below JM Financial expectation. Inventory correction during the quarter had an impact of 8-9% on revenue growth. EBITDA margin at 18.3 per cent was below JMF. Inventory correction is expected to bottom out in Q3 with normalisation in Q4. While US small agri demand remains muted, large Agri and CE demand remains healthy. Demand in EU also remains steady. 

Uniparts continues to see good traction (increasing wallet share/adding new customers) owing to China+1 de-risking strategy adopted by global OEMs. While near-term volume is expected to remain soft, we expect medium-term growth to be driven by focus on value-added and adjacent products. Profitability is expected to gradually improve to normalised margin level of about 21 per cent by Q4. 

We expect revenue/EPS CAGR of 9 per cent over FY23-26. Strong positive FCF, over 20 per cent return ratios and net cash position provides comfort. Stock currently trades at ~11x FY25 EPS. 

 Slowdown in global OHV demand and inability to gain orders for allied products remain key risks.