COMPANY UPDATE RETAIL EQUITY RESEARCH Minda Industries Ltd Automobile Auto Ancillaries BSE CODE:532539 NSE CODE: MINDAIND Bloomberg CODE: MIN IN SENSEX: 34,903 Buy Rating as per Midcap 12months investment period CMP Rs. 1,131 TARGET Rs. 1,324 RETURN 17% 06 th June 2018 Robust performance continues. Minda industries Ltd (MIL) is a diversified auto ancillary supplier, manufacturing products such as switches, horns, lights & others, having a leadership position in switch business with a market share of 67%. Q4FY18 consolidated revenue grew by 53%YoY led by consolidation, switching & other divisions. Standalone revenue grew by 26%YoY. EBITDA margin improved by 68bps on account of operating efficiency and higher capacity utilization in other business. Scaling up the product line in Alloy wheels, Infotainment & Reverse parking system will drive growth for the company Revenue to grow at 20% CAGR over FY18-20E led by higher contribution by core segments and incremental revenue from new products. Strong outlook in the domestic auto market & outperforming the industry growth by twice in FY18 underlines MIL. We value at 26x on FY20E EPS and arrive at a target price of Rs1,324 and upgrade to buy rating. Outperformed the industry growth Q4FY18 revenue grew by 52.9%YoY led by positive effect of consolidation of group companies Mindarika Pvt Ltd (4W switches) & Denso Ten Minda Ltd (Car infotainment). Standalone business grew by 26%YoY due to superior product mix. EBITDA margin expanded by 68bps on account of operating efficiency and higher capacity utilization. Adj. PAT grew by 123%YoY. Despite policy changes industry registered a growth of 15%YoY in production for the full year FY18 and Minda outperformed by registering 32%YoY growth. Strengthening leadership position in core segment During FY18 switching business grew by 36%YoY. After the consolidation MIL hold 65% market share in the switching business. Whereas lighting and horns grew by 19% & 14% mainly due to inorganic growth. MIL has robust capex plan of Rs 375cr for FY19 and 90% of consolidation exercise is over. Greenfields expansion for the lighting plant in Chennai to cater primarily to Renault Nissan has been approved and is expecting the tune of 55cr. Mexico plant for Clarton horns is started operational. We expect the consolidated Revenue to grow at 20% CAGR over FY18-20E led by higher contribution by core segments and incremental revenue from Alloy wheel, infotainments Scaling up other business to drive growth Alloy wheel capacity is expected to be ramped up by another 60,000 wheels at their newly set-up Gujarat plant for an investment of Rs.205 Cr. The total capacity is ~255,000 wheels. MIL expects to increase content per vehicle from BS- VI implementation like Engine sensors & advance filtrations and mandatory guidelines like Airbag and Reverse Parking System (RPS). Plant for the recently signed JV with Taiwanese TTE (RPS) to be start production by Mar 18. Valuations On the back of strong earnings growth of 23%CAGR and ROE of ~27% by FY19E, we remain confident about the long term prospects of MI, but due to recent run up in stock price we see limited upside at current level. We upgrade our Revenue & PAT estimate for FY18/F19E by 6%/8% & 15% respectively, to factor in group consolidation of associate companies. We value at 26x on FY20E EPS and arrive at a target price of Rs1,324 and upgrade to buy rating. Company Data Market Cap (cr) Rs. 9,772 Enterprise Value (cr) Rs. 10,216 Outstanding Shares (cr) 8.6 Free Float 29% Dividend Yield 0.46% 52 week high Rs. 1,357 52 week low Rs. 587 6m average volume (cr) 0.13 Beta 1.1 Face value Rs2 Shareholding (%) Q2FY18 Q3FY18 Q4FY18 Promoters 70.9 71.1 71.1 FII s 7.8 8.2 9.5 MFs/Insti 7.3 6.7 6.0 Public 13.9 14.0 13.4 Total 100.0 100.0 100.0 Price Performance 3months 6months 1 Year Absolute Return 17.4% 12.8% 113.3% Absolute Sensex 2.3% 3.7% 12.3% Relative Return* 15.1% 9.1% 101.0% *over or under performance to benchmark index 1500 1000 500 MIL Sensex rebased 0 May-17 Aug-17 Nov-17 Feb-18 May-18 Consolidated (Rs.cr) FY18A FY19E FY20E Sales 4,471 5,405 6,351 Growth (%) 32.0 20.9 17.5 EBITDA 534 665 794 Margin (%) 11.9 12.3 12.5 PAT Adj 293 371 440 Growth (%) 78.7 12.3 18.5 Adj.EPS 293 371 440 Growth (%) 58.0 26.9 18.5 P/E 33.4 26.3 22.2 P/B 8.0 6.2 4.9 EV/EBITDA 19.1 15.4 12.8 ROE (%) 25.9 26.6 24.5 D/E 0.4 0.3 0.2 Saji John Analyst
Quarterly Financials Profit & Loss Account (Rs cr) Q4FY18 Q4FY17 YoY Growth % Q3FY18 QoQ Growth % Sales 1,371 897 52.9 1,056 29.8 EBITDA 170 105 61.6 126 34.1 EBITDA margins 12.4 11.7 +70bps 12.0 +40bps Depreciation 49 36 35.6 42 16.4 EBIT 121 69 75.1 84 42.9 Interest 14 8 78.5 7 98.4 Other Income 12 3-8 - Exceptional Items - - - - - PBT 157 64 145 85 84.9 Tax 23 12 90.2 24-7.3 Share of profit from Associate 5 10-5 - Reported PAT 140 63 122.5 66 111.7 Adjustments - - - - - Adj PAT 140 63 122.2 66 111.7 No. of shares (cr) 8.6 7.9-8.6 8.6 EPS (Rs) 16.3 7.9 104.2 7.7 111.7 Change in estimates Old estimates New estimates Change % Year / Rs cr FY19E FY20E FY19E FY20E FY19E FY20E Revenue 5,089 5,849 5,405 6,351 6.2 8.4 EBITDA 626 731 664 794 3.9 1.6 Margins (%) 12.3 12.5 12.3 12.5 - - PAT 323 382 371 440 14.9 15.1 EPS 37.4 44.2 43.0 50.9 14.9 15.1
Consolidated Financials Profit & Loss Account Balance Sheet Y.E March (Rs cr) FY16A FY17A FY18A FY19E FY20E Sales 2527 3386 4471 5405 6351 % change 13.5 34.0 32.0 20.9 17.5 EBITDA 238 374 534 665 794 % change 54.1 57.3 42.7 24.5 19.4 Depreciation 89 132 161 193 221 EBIT 145 238 369 468 568 Interest 26 40 35 34 34 Other Income 14 14 33 38 30 PBT 139 212 405 471 565 % change 63.7 52.8 91.4 16.2 19.8 Tax 28 46 98 125 150 Tax Rate (%) 20.0 21.9 24.1 26.5 26.5 Reported PAT 111 185 331 371 440 Adj* 5 0 38 0 0 Adj PAT 106 185 293 371 440 % change 105.9 74.7 58.0 26.9 18.5 No. of shares (cr) 7.9 7.9 8.6 8.6 8.6 Adj EPS (Rs) 13.4 23.3 33.9 43.0 50.9 % change 105.9 74.7 45.1 26.9 18.5 DPS (Rs) 1.7 1.7 1.5 1.5 1.6 Y.E March (Rs cr) FY16A FY17A FY18E FY19E FY20E Cash 34 369 134 231 460 Accounts Receivable 364 524 612 740 870 Inventories 184 251 295 347 407 Other Cur. Assets 42 19 21 22 26 Investments 44 55 89 81 95 Gross Fixed Assets 1,388 1,888 2,388 2,768 3,138 Net Fixed Assets 558 926 1,265 1,447 1,601 CWIP 130 147 300 200 200 Intangible Assets 9 10 11 12 13 Def. Tax (Net) 7 7 7 7 7 Other Assets - - - - - Total Assets 1,484 2,448 2,883 3,281 3,909 Current Liabilities 178 192 282 296 348 Provisions 50 86 88 107 125 Debt Funds 353 452 444 436 428 Other Liabilities 321 515 710 726 853 Equity Capital 19 16 17 17 27 Reserves & Surplus 452 1,052 1,202 1,560 1,987 Shareholder s Fund 472 1,068 1,219 1,577 2,014 Total Liabilities 1,484 2,452 2,883 3,281 3,909 BVPS (Rs) 58 133 140 181 232 Cash flow Ratios Y.E March (Rs cr) FY16A FY17A FY18E FY19E FY20E Net inc. + Depn. 231 387 570 668 790 Non-cash adj. 22 0 0 0 0 Changes in W.C -108-35 48-304 -178 C.F.O 146 313 618 365 612 Capital exp. -179-522 -658-280 -380 Change in inv. -9-11 -34 8-14 Other invest.cf -11 0 0 0 0 C.F - investing -257-514 -705-247 -381 Issue of equity 0 392-97 0 19 Issue/repay debt 160 99-8 -8-8 Dividends paid 0 1 10 12 12 Other finance.cf -23 24 0 0 0 C.F - Financing 123 501-119 -21-2 Chg. in cash 13 335-205 97 229 Closing cash 34 340 134 231 460 Y.E March FY16A FY17A FY18E FY19E FY20E Profitab. & Return EBITDA margin (%) 9.4 11.0 11.9 12.3 12.5 EBIT margin (%) 5.7 7.0 8.3 8.7 8.9 Net profit mgn.(%) 4.2 5.5 6.5 6.9 6.9 ROE (%) 25.3 24.5 25.9 26.6 24.5 ROCE (%) 14.4 13.6 15.4 16.3 15.9 W.C & Liquidity Receivables (days) 47.2 47.9 46.4 45.7 46.3 Inventory (days) 23.4 23.4 22.3 21.7 21.7 Payables (days) 42.5 45.1 50.0 48.5 45.4 Current ratio (x) 3.2 4.6 3.3 3.8 4.2 Quick ratio (x) 2.0 2.7 2.2 2.5 2.5 Turnover &Levg. Gross asset T.O (x) 2.0 2.1 2.1 2.1 2.2 Total asset T.O (x) 2.0 1.7 1.7 1.8 1.8 Int. covge. ratio (x) 5.7 6.0 10.5 13.6 16.9 Adj. debt/equity (x) 0.7 0.4 0.4 0.3 0.2 Valuation ratios EV/Sales (x) 3.7 3.0 2.3 1.9 1.6 EV/EBITDA (x) 39.2 27.3 19.1 15.4 12.8 P/E (x) 84.7 48.4 33.4 26.3 22.2 P/BV (x) 19.0 8.6 8.0 6.2 4.9
Recommendation Summary (last 3 years) Dates Rating Target 1400 31-March-2017 Buy 510 1200 1000 800 600 400 200 0 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 24-May-2017 Accumulate 606 16- November 2017 Hold 1097 1st March 2018 Accumulate 1273 6- June 2018 Buy 1324 Source: Bloomberg, Geojit Research Investment Rating Criteria Large Cap Stocks; Buy - Upside is above 10%. Hold - Upside is between 0% - 10%. Reduce - Downside is more than 0%. Neutral - Not Applicable Mid Cap and Small Cap; Buy - Upside is above 15% Accumulate - Upside is between 10% - 15%. Hold - Upside is between 0% - 10%. Reduce/Sell - Downside is more than 0%. Neutral - Not Applicable To satisfy regulatory requirements, we attribute Accumulate as Buy and Reduce as Sell The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock always carries the risk of being upgraded to BUY or downgraded to a HOLD, REDUCE or SELL.NEUTRAL-The analyst has no investment opinion on the stock, under review. General Disclosures and Disclaimers CERTIFICATION I, Saji John, author of this Report, hereby certify that all the views expressed in this research report reflect our personal views about any or all of the subject issuer or securities. This report has been prepared by the Research Team of Geojit Financial Services Limited, hereinafter referred to as Geojit. 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