ICICI Direct, a leading brokerage firm, in its recent report on Minda Corporation Ltd. (MCL) has recommended "buy" for a target price of Rs 270 apiece. MCL is one of the leading automotive component manufacturing companies in India with a pan-India presence and international footprint. It is a small cap Auto Ancillaries Sector company having a market cap of Rs 5,253.77 crore.
MCL primarily serves auto OEMs across two main verticals - Mechatronics & Aftermarket (i.e. MCH - safety & security system (lock & key, smart key), die-casting, starter motors, etc.) and Information & Connected Systems (i.e., ICS - mainly wiring harnesses, sensors and instrument clusters). FY22 segment mix -2-W ~49%, CV ~19%, PV ~18%, Aftermarket ~15%. FY22 product mix - MCH ~57%, ICS ~43%. India ~84%, Exports ~16%.
Stock Outlook & Returns
The current market price (CMP) of the Minda Corporation is Rs 219.75 apiece. The 52 week low of the stock is Rs 118.70 and the 52-week high is Rs 287, respectively.
It has given 5.14% negative return in the past 1 week. In the past 3 months, it gave 31% positive return. Over a year, it gave 71.81% positive return. In the past 3 years, it a multibagger return of 146.36%. In the past 5 years, it gave 71.88% positive return.
According to the brokerage's estimated target price and the current market price, the stock is likely to surge by 23%.
- ICICI Direct said, "We attended the plant visit of MCL and were impressed with the work the company is doing to augment its kit value in terms of technology upgradation in existing products as well as development of new products."
- It has largely EV immune product profile; ~95% are powertrain agnostic.
- MCL will have a prominent role to play in the electrification drive domestically in 2-W & 3-W space with EV specific products like DC-to-DC convertor, battery charger, etc, already in its kitty and work on development of other critical products like BMS, charger protector, etc, with potential kit value pegged at Rs 16000-20,000/unit vs. Rs 4000-5000 in current 2-W.
- The company has all leading OEMs in the electric space as its clients with prominent names being Ola Electric, Hero Electric, Ampere, Revolt, Ather. It is watchful of upcoming OEMs and is carefully partnering with them.
- MCL remains committed to grow ahead of industry (~10-12%) and sustainably attain healthy double digit margins through operational efficiencies & increasing localisation content in the wiring harness division.
Buy for a target price of Rs 270
MCL's share price has grown at ~12% CAGR over five years from ~Rs 125 levels in September 2017, outperforming broader Nifty Auto Index. "We retain BUY rating amid industry tailwind of double digit volume growth, lean b/s, healthy return ratios and penchant to grow ahead of industry. Revising our estimates, we now value MCL at Rs 270 i.e. 20x P/E on FY24E EPS of (earlier target price: Rs 260)," the brokerage has said.
Key triggers for future price performance
According to the brokerage, the key triggers for future price performance are:
- Robust order wins (~Rs 5,930 crore lifetime order win in FY22; replacement & new business combined; EV order win at Rs 952 crore) imparts healthy revenue visibility. We build 25.4% consolidated sales CAGR in FY22-24E.
- Benign RM price outlook, operational efficiencies and localisation efforts to led margin recovery/, RoCE to 12.2%, 20.2%, respectively, by FY24E.
The stock has been picked from the brokerage report of ICICI Direct. 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.