Buy This Multibagger Auto Ancillary Stock For A Target Price of Rs 315: ICICI Securities

Minda Corporation Ltd (MCL) is a key player in the international automobile industry and one of the top suppliers of OEM automobile parts. With exposure in Indonesia, Vietnam, Uzbekistan, the United States of America, and Japan, the firm now caters to the major passenger vehicle, commercial vehicle, motorcycle & scooter, off-road vehicle, and Tier 1 companies in India. The company's shares on the NSE have risen from Rs 96 to the current market price of Rs 270 in a year, representing a multibagger return of 180.81 per cent. However, the stock is up 36.50 per cent year to date (YTD), while the stock has risen 110.86 per cent in the previous six months. In the previous month, the stock has gained 37.20 per cent, and in the last five days, it has climbed 19.81 per cent. ICICI Securities has issued a buy call on the stock with a target price of Rs 315 in the next 12 months.

Key takeaways of the stock as per ICICI Securities

• Steadily stepping up the game in the EV space with development of new products in-house. Potential kit value in electric 2-W seen at Rs 16,000- 20,000/unit from prevailing ICE 2-W kit value at Rs 4,000-4,500/unit.
• Increase in kit value envisaged through content increase in existing products as well as new product offerings. On-boarded marquee EV OEMs like Ola Electric (sole supplier of smart key), Hero Electric, Ampere among others.
• History of outgrowing base OEM industry in the past with further commitment to grow 10-15% ahead of industry volumes, going forward.

Key investment rationale for Minda Corporation (MCL) according to ICICI Securities

• Robust order wins (~Rs 4,232 crore lifetime orders for 9MFY22; replacement & new business combined; EV order win at Rs 843 crore) imparts healthy revenue visibility. We build 23.8% FY21-24E consolidated sales CAGR.
• Strong EV order book with two new EV OEMs (Hero Electric & BMW) added to list marking all prominent names in the EV space as its clients.
• Acquisition of JV's stake in Stoneridge (for Rs 161 crore) to be margin and return ratios accretive. Consequent consolidated RoE, RoCE seen at 17-19% by FY24E. EBITDA margins are seen improving to 12.2% by FY24E.

Buy for a target price of Rs 315

ICICI Securities has said that "MCL has been one of our early finds with stock price nearly 3x since our initiation in Dec 2020, vastly outperforming Nifty Auto Index. We retain BUY rating amid healthy growth prospects, going forward. Introducing FY24E estimates, we now value MCL at a revised target price of Rs 315 i.e. 25x P/E on FY24E EPS of (previous TP Rs 220)."

Slower than anticipated recovery in industry volumes and slower than anticipated margin improvement are the key risks of the stock as per the brokerage.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.