BUY CMP (Rs) Target Price (Rs) Potential Upside Sensex Nifty Key Stock data BSE Code NSE Code Bloomberg Shares o/s, Cr (FV 2) Market Cap (Rs Cr) 3M Avg Volume 52 week H/L Shareholding Pattern (%) Promoter FII DII 1 Year relative price performance 145 135 125 115 105 95 85 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Research Analyst Jun-16 6 19.1 15.6 Jul-16 Aug-16 Minda Corp Sep-16 Ajay Pasari, CFA ajay.pasari@religare.com 93 117 25.8% 28,865 8,927 538962 MINDACORP MDA:IN 20.9 1,938 255,481 85/143.3 Sep-16 Dec-16 Oct-16 70.2 12.6 17.1 Nov-16 Ni y Dec-16 Jan-17 70.2 9.8 19.1 Feb-17 Subdued quarter; temporary headwinds Minda Corp reported poor set of numbers, partially hit by demonetization, higher material costs in its subsidiary Minda Furukawa and pre-operative expenses related to the Mexico plant and technical centre in Pune. As a result, though Net revenue increased by 10%, Net profit slumped by 36.3% on YoY basis. We expect margins to improve from FY18E with recovery in demand, cost rationalization measures, localization efforts and focus on high yield products. Maintain Buy. : Total consolidated revenue increased by 10% to Rs. 723 cr compared to Rs. 656.5 cr in the same quarter last year. Revenue growth came from interior systems (+18% YoY) and safety security systems (+16% YoY). The company disappointed on margins front, wherein EBITDA margin stood at 3.4% against 10.4% on YoY basis. Operational profit declined by 63.8% to Rs. 2 cr led by high material cost in Minda Furukawa (subsidiary) and pre-operative expenses in the Mexico plant and Spark Minda technical centre in Pune. The management has guided to improve operational margins to ~10% in FY18E, though we prefer to remain conservative for now. Net profit declined by 36.3% led by weak operational performance and higher tax expenses. Net profit stood at Rs. 2 cr compared to Rs. 31.6 cr in Q3FY16. As a result, Net profit margin declined from 4.8% to 2.8% on YoY basis. Outlook & Valuation: We remain positive on the business of the company with diversified product base and strong clientele. The management is taking steps to improve margins by focusing on localization and cost rationalization in its subsidiary; Minda Furukawa. It is considering exiting loss making products and pricing negotiations with OEMs and JV partners. It has significant order book for compressor housing and turbochargers which shall aid in revenue growth. Its subsidiaries, Minda SAI got order for ABS wiring harness and Minda Stoneridge being leader in emission and soot sensors will benefit from new regulatory norms. We expect consolidated Revenue and Net profit to grow at CAGR of 15.6% and 18.4% respectively over FY16-19E. We maintain a Buy on the stock with a target of Rs. 117. Financial Summary - Consolidated Particulars, Rs cr Net revenue EBITDA OPM (%) APAT APATM (%) EPS, Rs RoE (%) P/E (x) FY15 FY16 FY17E FY18E 1,971 182 90 4.3 20.9 22.0 2,446 223 9.1 107 5.1 20.7 18.4 2,899 201 6.9 104 4.9 17.2 18.9 3,299 282 8.6 130 6.2 15.0 3,783 352 178 8.5 21.4 1 February 23, 2017
P&L Account Quarterly Particulars, Rs cr Q3FY17 Q3FY16 Y-o-Y% Q2FY17 Net Revenue Material cost Employee cost Other expenses Total expenditure 723.0 478.9 126.7 92.8 698.3 656.5 396.9 114.2 77.3 588.4 1 20.7 10.9 2 782.2 485.7 125.7 89.7 701.1 Q-o-Q% -7.6-1.4 0.8 3.4-0.4 EBITDA 2 68.1-63.8 81.1-69.6 OPM (%) 3.4 10.4-696bps 10.4-695bps Other income 20.2 3.1 5 9.4 115.3 Depreciation 21.1 21.4-1.3 20.5 3.0 PBIT 23.8 49.8-52.2 7-66.0 Interest expenses 9.0 9.6-6.7 13.9-35.4 PBT 14.8 40.2-63.1 56.1-7 Exceptional items -2.9 15.6 Tax 11.7 26.1 10.2 1 Tax/PBT % 78.7 23.0 5,566bps 18.2 6,043bps PAT 3.2 33.9-90.7 3-89.6 Minority interest -16.9 2.3-1.7 APAT 2 31.6-36.3 32.0-37.2 APATM (%) 2.8 4.8-203bps 4.1-131bps EPS 1.5-36.4 1.5-37.3 Q3FY17 Revenue mix: Product category Q3FY17 Revenue mix: End user category 14% 10% 39% 28% 36% 47% 25% Safety, Security & Restraint Systems Driver Informa on & Telema cs Systems Interior Systems Passenger Vehicles Commercial & Off-Highway Vehicles 2/3 Wheelers A er Market
P&L Account - Consolidated Net sales Other operating income Total income Expenditure Raw material consumed Employee cost Other expenses Total expenditure 1,933.2 37.5 1,970.6 1,196.9 336.5 255.4 1,788.9 2,415.8 29.7 2,445.5 1,498.6 416.5 307.1 2,222.2 2,866.5 32.0 2,898.5 1,841.5 495.6 360.2 2,697.3 3,263.3 3 3,298.5 2,05 56 405.9 3,016.1 3,74 39.4 3,783.4 2,330.4 639.0 462.0 3,431.3 EBITDA 181.8 223.3 201.2 282.4 352.1 OPM (%) 9.1 6.9 8.6 Other income 22.7 17.3 35.4 21.3 21.7 Depreciation 6 7 85.1 89.0 96.0 PBIT 144.2 166.2 151.5 214.6 277.7 Interest expenses 35.7 33.4 41.7 33.7 27.5 PBT 108.5 132.8 109.8 180.9 25 Exceptional items 2.4 13.7 15.0 Tax 27.2 36.6 39.9 52.5 75.1 Tax rate % 2 25.0 36.4 29.0 3 PAT 83.7 11 84.9 128.5 17 Less: Share of minority interest 1.4-3.0 - -1.9-2.6 Add: Profit/Loss of associates Adjusted Net Profit 89.5 107.3 103.5 130.4 177.8 PATM (%) EPS 4.3 5.1 4.9 6.2 8.5
Balance sheet - Consolidated Share Capital Reserves & Surplus Total Shareholder's Fund 60.7 405.9 466.6 506.6 567.4 579.0 639.8 691.8 752.6 845.7 906.5 Minority interest 24.2 Non-Current Liabilities 207.5 177.3 26 248.4 23 Long term borrowing 180.7 141.6 230.9 207.8 187.0 Deferred tax liability 5.7 Other long term liabilities 3.9 6.5 7.1 7.7 8.3 Long term provision 17.3 17.9 2 21.7 23.4 Current Liabilities 723.3 962.4 1,071.4 1,059.6 1,078.2 Short term borrowing 26 317.4 365.0 273.7 205.3 Trade payables 307.6 425.6 493.7 561.3 635.4 Short term provisions 2 42.7 44.9 51.6 5 Other current liabilities 126.8 176.7 167.9 172.9 178.1 Total liabilities 1,421.6 1,770.8 2,044.2 2,124.3 2,278.3 Fixed Assets 477.3 598.3 713.1 689.1 658.1 Goodwill on Consolidation 108.9 13 13 13 13 Non Current investment 28.9 Long Term loans & advances 1 26.8 29.5 32.5 34.1 Other non-current assets Current Assets 786.4 1,006.6 1,162.5 1,26 1,447.0 Inventories 230.8 32 395.8 459.9 528.5 Trade receivables 317.6 435.3 506.2 577.1 657.9 Cash & Cash equivalents 44.1 88.2 7 30.8 55.1 Short term loans and advances 17 16 184.1 193.3 203.0 Other current assets 2.0 2.4 2.5 2.6 Total assets 1,421.6 1,770.8 2,044.2 2,124.3 2,278.3
Cash Flow statement - Consolidated Profit Before Tax Add: Depreciation Add: Interest cost Op profit before working capital changes Changes In working Capital Direct taxes Cash Flow From Operating Activities 110.9 6 27.9-2.9 196.1 132.1-24.1 304.2 146.5 7 30.2 2.6 253.8 13.3-41.4 225.8 124.8 85.1 41.7 251.6-108.6-39.9 103.1 180.9 89.0 33.7 303.7-65.7-52.5 185.5 25 96.0 27.5 373.8-71.4-75.1 227.3 Cash Flow from Investing Activities Purchase of Fixed assets -87.0-98.1-20 Sale of Fixed assets 6.1 6.7 Net proceeds from Investment 2.4-1.8 25.6-6 Cash Flow from Investing Activities -52.9-157.8-20 Cash from Financing Activities Proceeds from issuance of shares Net proceeds from borrowings -101.5-13.4 136.8-114.3-8 Dividend (incl dividend tax) -9.9-1 -12.4-15.6-21.3 Interest cost -34.1-33.2-41.7-33.7-27.5-92.8 27.6 Cash Flow from Financing Activities -238.3-29.0 82.7-1 -138.0 Net Cash Inflow / Outflow 13.0 39.0-14.2-43.2 24.3 Opening Cash & Cash Equivalents 26.4 39.4 88.2 7 30.8 Closing Cash & Cash Equivalent 39.4 78.3 7 30.8 55.1
Key Financial ratios - Consolidated Dividend per share Rs Dividend Yield (%) Payout % EPS Rs Book Value per share Rs 4.3 21.6 9.7 5.1 26.3 1 4.9 30.6 0.4 1 6.2 36.0 0.6 1 8.5 43.3 Profitability Ratios EBITDA / Total income (%) 9.1 6.9 8.6 PBT/Total income (%) 5.5 5.4 3.8 5.5 6.6 NPM / Total income (%) ROCE (%) 12.9 13.5 11.5 12.4 15.4 ROE (%) 20.9 20.7 17.2 21.4 Liquidity ratios Debt-Equity Ratio 0.8 0.9 0.6 0.4 Current Ratio 1.1 1.1 1.2 1.3 Interest Cover Ratio 5.0 6.4 1 Turnover ratios Total Asset Ratio 1.4 1.5 1.5 1.6 1.7 Fixed Assets Ratio 4.8 5.7 Debtors Velocity Overall (Days) 56.4 56.2 5 59.9 59.6 Inventory (Days) 38.7 41.2 45.1 47.3 47.7 Creditors Velocity (Days) 51.5 5 57.9 58.4 57.7 Cash Conversion cycle 43.5 42.6 46.5 48.9 49.5 GROWTH YOY% Sales Growth % 2 24.1 18.5 13.8 1 Operating Profit % 44.6 22.9-9.9 40.4 2 Net Profit Growth % 12.8 19.8-3.5 25.9 36.4 VALUATION P / E Ratio P / BV Ratio EV / EBITDA 22.0 13.0 18.4 18.9 15.0 1 3.1 2.6 2.2 10.5 12.2 8.5 6.5
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