Buy This Multibagger Midcap Auto Ancillary Sector Stock, Target Price Rs 650: Emkay Global

Emkay Global has placed a call on UNO Minda Limited with a target price of Rs. 650/share. Investors buying the stock at the current market price could give up to 18% gains in 12 months, considering the given target price. It is a mid cap auto ancillary sector company engaged in the business of manufacturing of auto electrical parts and components including auto electrical parts such as switches lighting batteries and blow molded products and ancillary services. It has a market capitalisation of Rs 31,771.69 crore.

Stock Overview

On the NSE, the share price of UNO Minda on NSE is Rs 554.90/share, up 0.86% from its previous close. Its 52-week low is Rs 494, recorded on July 7, 2022, and its 52-week high is Rs 1,257.40, recorded on December 28, 2021, respectively. Over the year, the stock has returned a profit of 23.43% on investments. In 3 yeras, it gave multibagger returns of 220.01%, and in 5 years, it gave 166.9% multibagger returns.

Key takeaways from the Management Meet and plant Visits

The brokerage interacted with Chairman Nirmal Minda and visited Minda company plants. According to the brokerage, management reiterated that Minda is well-placed to outpace the underlying industry, thanks to the increasing content per vehicle (CPV), market-share gains and EV adoption.  

Key takeaways from the Management Meet and plant (Alloy wheels, Switches, Lighting, Steering wheel, Airbag) visits

• Minda is looking to expand those product lines that offer opportunity of import substitution, vertical expansion (core linked) and achievable financial targets (market share of 30% and 20% ROCE).
• Global component players (such as Tachi-S and Buehler), while entering India, aimed for partnership with Minda, which enjoys a reputable standing.
• Lighting segment revenues can grow by 4x over the next 5-7 years, led by higher industry volumes (2x), increase in LED penetration and market-share gains (Rs5bn new orders won last year). Minda has also won orders for headlights, from Tata Motors and M&M. 
• Alloy wheel product revenues can also grow by 4x over the next 5-7 years, driven by higher industry volumes (2x), increase in alloy wheel penetration (35% to 75%) and market-share gains (import substitution). 
• Switching segment is likely to outperform, steered by premiumization and market-share gains (localization of high-end switches).

Robust outlook; wallet-share gain to drive outperformance

Minda expects to do well in both, core segments and new products, supported by a strong order-book. Potential CPV in E-2Ws stands at Rs 61,300, with an annual order-book of over Rs 10bn. "We believe the company remains on track to increase its EV division's revenue to Rs 15-20bn in 5-6 years," the brokerage said. 

It added, "We expect FY23E revenue growth to be robust at 33%, and the uptrend is likely to endure, with FY23-25E revenue CAGR at 18%, underpinned by: 1) a cyclical upturn in the underlying PV/2W segments; 2) higher content-per-vehicle in core businesses, such as switches, lightings and acoustics; 3) improving presence in alloy wheels, sensors, and seatings; and 4) growing content/vehicle, led by EV penetration."

Buy for a target price of Rs 650/share

Commenting on the Valuation, the brokerage said, "We build-in earnings CAGR of 43% over FY22-25E. ROIC should expand from 11% in FY22 to 24% in FY25E, driven by improved profitability in both, core and emerging segments. After annual capex of Rs7.3bn in the next three years, average annual FCF is likely to be robust at Rs4.6bn. We recommend BUY on the stock, with DCF-based TP of Rs650/share, based on 37x Dec-24E EPS."

Disclaimer

The stock has been picked from the brokerage report of Emkay Global. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.