Broker's call: Minda Industries (Buy)

Updated on: Sep 03, 2021

Emkay Global

Minda Industries (Buy)

Target: ₹840

CMP: ₹696.85

Minda Industries, founded in 1958, is the largest domestic supplier of switches, horns, alloy wheels, seating and blow-molding. Further, it is the second largest supplier of airbags, air filters, speakers and telematics, and the third largest provider in the lightings segment.

Minda is exposed to multiple growth drivers: 1) cyclical recovery in the 2W/4W segments; 2) market share gains, driven by import substitution in switches and alloy wheels; and 3) growing content per vehicle (CPV), led by premiumisation and new product forays such as sensors. Further, Minda is well-placed to benefit immensely from EV adoption over the long term, which should result in significantly higher ‘kit values’ compared to ICE vehicles. We model average annual FCF generation of ₹420 crore for FY21-24, and expect the company to turn net-cash-positive by FY24, from ₹530 crore of pro-forma net-debt post its recent QIP.

Our September 2022 target price of ₹840 is DCF-driven and implies forward P/E of 32x. Minda deserves to trade at premium valuations, given its exposure to the PV segment, long term upside from EV adoption and a sustainable upward re-set in return ratios.

Key risks include delay in auto sector or macro recovery, goverm,emt allowing cheaper imports, and adverse currency movements.

Published on September 02, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like

Recommended for you