1
May 25, 2018
Minda Industries Ltd
India Research - Stock Broking
HOLD
Recommendation (Rs.)
CMP (as on May 24, 2018) 1278
Target Price 1412
Upside (%) 10
Stock Information
Mkt Cap (Rs.bn/US$ bn) 111 / 1.6
52-wk High/Low (Rs.) 1358 / 550
3M Avg. daily volume (mn)
0.1
Beta (x) 1.1
Sensex/Nifty 34663 / 10514
O/S Shares(mn) 87.1
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 71.0
FIIs 9.5
DIIs 6.0
Others 13.5
Stock Performance (%)
1M 3M 6M 12M
Absolute 14 16 11 130
Relative to Sensex 14 14 8 101
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
Analyst Contact
Vivek Ranjan Misra
040 - 3321 6270
vivekr.misra@karvy.com
For private circulation only. For important information about Karvy’s rating system and other disclosures
refer to the end of this material. Karvy Stock Broking Research is available on Thomson Reuters &
Bloomberg (Code: KRVY<GO>)
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 25273 35049 44706 52147 60985
EBITDA 2378 3835 5339 6322 7400
EBITDA Margin (%) 9.4 10.9 11.9 12.1 12.1
Net Prot 1059 1679 2720 3457 4238
EPS (Rs.) 12.2 19.3 31.2 39.7 48.7
RoE (%) 25.3 28.0 25.7 22.2 22.1
PE (x) 16.4 23.0 40.9 32.2 26.3
Source: Company, Karvy Research; *Represents multiples for FY16 - FY18 are based on historic market price
Higher Capacity Utilization Translates to Operating Margin
Growth
Minda Industries Ltd declared revenue of Rs. 13709 Mn during Q4FY18 which
was above our estimates by 17.2% on account of subsidiary consolidation of
Mindarika Pvt ltd (MRPL) and Denso Ten Minda Ltd. EBITDA margins expanded by
68 bps to 12.4% due to higher capacity utilization across divisions. The company
is well-diversied in terms of product portfolio and client base where new product
development to suit BS VI regulations are already in the pipeline. Furthermore,
share of 4W revenue has increased to 44% in FY18 as compared to 39% in the
previous year supported by higher kit value as a result of increase in components
per vehicle. Although the revenue visibility is intact, we believe that the stock is
trading at a higher valuation of 26.3x and therefore recommend a HOLD.
Switches: Revenue from switches grew at 30.5% YoY during FY18 posting
Rs. 15800 Mn where EBITDA margins improved by 220 bps to 12%. Increase in
share of business with OEMs and consolidation of Mindarika account for the current
market share of 65% in India. Going forward, we estimate revenue from switches
to improve at 20% CAGR during FY18-20E on the back of positive industry outlook
especially for 4W and 2W.
Lighting: Acquisition of Spain based Rinder Lighting has spanned out well for MIL
which supported revenue growth of 14% YoY during FY18 for the lighting division
where EBITDA margin improved to 9.9% Vs 9.1%in FY17. Key customers comprise
Maruti Suzuki (MSIL), Bajaj, TVS and Renault and we expect revenue to improve at
CAGR of 12% during FY18-20E.
Acoustic Systems: With a domestic market share of 47% in this segment, revenue
for FY18 stood at Rs. 7170 Mn, up by 8.8% YoY out of which Clarton Horns (100%
subsidiary) contributed Rs. 3970 Mn in FY18. We estimate revenue to grow at 9%
CAGR during FY18-20E driven by higher share of business with clients.
Valuation and Risks
We estimate EPS to grow at a CAGR of 25% during FY18-20E and value MIL at
29.0x P/E for FY20E EPS of Rs. 48.7, above industry P/E of 24.6x as the company
is expected to exceed industry growth rate. The target price is Rs. 1412 with an
upside potential of 10%.
Company Update
Consumer Discretionary - Automotive
Minda Industries Ltd
Bloomberg Code: MNDA IN
80
130
180
230
280
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
Minda Industries Ltd
Sensex
2
May 25, 2018
Minda Industries Ltd
Key takeaways from quarterly earnings
Alloy Wheels: Capacity addition in Minda Kosei (70% subsidiary) by another
60,000 wheels is expected to fare well for the company considering the order book
build-up from MSIL for new models as ~90% of the revenue is derived from MSIL.
Mindarika Pvt Ltd (4W switches), Denso Ten MINDA & MINDA Ten (Car Infotainment)
have been consolidated in Q4FY18 leading to 52.9% YoY growth in revenue.
Additional sales from Mindarika for Q4FY18 was Rs. 2010 Mn.
TG Minda which manufactures steering wheels with airbags and fuel caps will
become a joint venture company from 1st July, 2018 for an acquisition cost of
~Rs. 130 Cr. MSIL is one of their major clients in this product range.
MIL to hive o 2W lighting business to Rinder India Private Limited at book value
during FY18-19.
90% of the group consolidation has been done and the remaining is expected to be
completed by Dec 2018.
The company expects to benet from BS VI implementation from the following
products:
Sensors and Engine related sensors
Advance ltrations and canisters
Seat belts
On board diagnostics
Product development such as reverse parking system is expected to be launched
after June 2019 which is to cater to the new models of MSIL.
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.
The following plants have been recently commissioned.
New product
developments include
reverse parking system,
sensors and on board
diagnostics.
MIL to benet from BS VI
norms
Cumulative capacity utilization is ~86% with an operating expenditure of
Rs. 200 Cr.
Average cost of borrowing in India is 8-8.5% and overseas is at the range of
5.5-5.9%.
There was an exceptional income (standalone) of Rs. 5.5 Cr as the battery division
was sold to its wholly-owned subsidiary Minda Storage batteries Pvt Ltd during
April 2017.
The company has declared a nal dividend of Rs 1.6/share and the total dividend
for FY18 amounts to Rs. 2.8/share.
Management has issued bonus shares to the shareholders of the company in the
ratio of 2 bonus equity shares of Rs. 2 each fully paid up for every 1 existing equity
share of Rs. 2 each fully paid up (in the ratio of 2:1).
Exhibit 2: Plants recently commissioned
Company Product Start of Production Investment (Rs. Cr)
MRPL (Gujarat) 4WSwitch May 2018 59
Minda Kosei (Gujarat) Alloy Wheel May 2018 205
Minda Onkyo (Haryana) Speaker Sept 2017 46
Minda TI’E DAPS (Haryana) Reverse Parking Mar 2018 34
Source: Company, Karvy Research
3
May 25, 2018
Minda Industries Ltd
Exhibit 3: Q4FY18
YE Mar (Rs. Mn) Q4FY18 Q3FY18 QoQ(%) Q4FY17 YoY(%)
Turnover 13709 10562 29.8 8968 52.9
Expenditure 12014 9298 29.2 7919 51.7
EBITDA 1695 1264 34.1 1049 61.6
Depreciation 489 420 16.4 360 35.7
Interest 139 70 98.4 78 78.6
Other Income 124 77 61.2 32 286.9
PBT 1191 851 40.0 643 85.2
Ta x 225 243 (7.4) 118 90.2
Minority Interest 45 66 (32.3) 66 (32.2)
Associate Prot Share 51 53 (4.1) 104 (51.1)
Adjusted PAT 972 595 63.5 563 72.7
EBITDA Margin ( %) 12.4 12.0 40 bps 11.7 67 bps
EBIT Margin (% ) 8.8 8.0 81 bps 7.7 112 bps
Net Prot Margin (%) 7.1 5.6 146 bps 6.3 81 bps
Source: Company, Karvy Research
During FY18, Acoustics
division reported a decline
in EBITDA margin (8% vs.
10%)due to pre-operating
expenses in Mexico plant
Exhibit 4: Consolidated revenue break-up
Source: Company, Karvy Research
Exhibit 6: Geographical split
Source: Company, Karvy Research
Exhibit 5: Channel-wise break-up
Source: Company, Karvy Research
Exhibit 7: Segment-wise break-up
Source: Company, Karvy Research
32.0%
34.6%
25.0%
25.5%
17.0%
15.7%
26.0%
24.2%
0%
20%
40%
60%
80%
100%
FY17
FY18
Lighting
Horns
Others
OEM
88.0%
Replacement
12.0%
India
82.0%
International
18.0%
2
-wheeler
56.0%
4-wheeler
44.0%
4
May 25, 2018
Minda Industries Ltd
Excluding subsidiary
consolidation our revenue
variation would be 0.1%
We value MIL at 29.0x P/E
which is above industry
P/E of 24.6x.
Exhibit 9: MIL 5 yr PE Band
Source: Bloomberg, Karvy Research
Exhibit 10: S&P 500 Automotive components industry 5yr PE Band
Source: Bloomberg, Karvy Research
Exhibit 8: Estimates and Consensus - Q4FY18
(Rs Mn) Actual Karvy Est Consensus
Variation (%)
Karvy Est Consensus
Net sales 13709 11702 11436 17.2 19.9
EBITDA 1695 1303 1369 30.1 23.8
EBITDA Margin (%) 12.4 11.1 12.0 123 bps 39 bps
EPS (Rs.) 11.7 8.1 8.0 44.2 46.0
Source: Company, Karvy Research
0
10
20
30
40
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb
-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
1 Yr Fwd P/E
Average P/E
1 SD
-1 SD
60
80
100
120
140
0
200
400
600
800
1000
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
48.4x
29.5x
10.6x
Price (Rs.) (RHS)
5
May 25, 2018
Minda Industries Ltd
Financials
Exhibit 11: Income Statement
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Revenues 25273 35049 44706 52147 60985
Growth (%) 13.5 38.7 27.6 16.6 16.9
Operating Expenses 22895 31214 39367 45825 53585
EBITDA 2378 3835 5339 6322 7400
Growth (%) 54.1 61.2 39.2 18.4 17.1
Depreciation & Amortization 926 1357 1649 1787 1855
EBIT 1452 2478 3690 4536 5545
Other Income 140 139 334 521 610
Interest Expenses 257 393 351 341 355
PBT 1335 2223 3673 4716 5800
Tax 277 489 977 1273 1566
Prot from associate/JV 117 145 231 242 254
Minority interest 115 200 207 228 250
Adjusted PAT 1059 1679 2720 3457 4238
Growth (%) 103.7 58.5 61.9 27.1 22.6
Source: Company, Karvy Research
Exhibit 12: Balance Sheet
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Cash & cash Equivalents 567 3765 1595 2996 5003
Trade Receivables 3639 5235 7897 8104 10609
Inventory 1838 2513 4175 4397 4960
Loans & Advances 1124 1400 509 2086 2439
Investments 436 546 1552 1552 1552
Net Block 7029 10327 15613 16826 17471
Other Assets 235 324 2310 1656 1656
Total Assets 14869 24111 33651 37617 43691
Trade Payables 3214 5151 7984 8256 9288
Provisions 525 860 1186 1490 1743
Debt 3531 4520 5429 5251 5469
Other Liabilities 1785 1917 3025 3271 3819
Total Liabilities 9055 12448 17624 18268 20320
Shareholders Equity 194 159 174 174 174
Reserves & Surplus 4524 10115 13743 16837 20609
Total Networth 4718 10273 13917 17012 20783
Minority Interest 1096 1390 2110 2338 2588
Total Networth & Liabilities 14869 24111 33651 37617 43691
Source: Company, Karvy Research
Revenue to grow at CAGR
of 17% during FY18-20E
6
May 25, 2018
Minda Industries Ltd
Exhibit 13: Cash Flow Statement
YE Mar (Rs. Mn) FY16 FY17 FY18E FY19E FY20E
PBT 1387* 2223 3673 4716 5800
Depreciation 926 1357 1649 1787 1855
Net Interest ow 108 310 17 (180) (254)
Tax Paid (253) (508) (977) (1273) (1566)
Inc/dec in Net WC (817) 177 (824) (530) (1588)
Prot from associates 117 - 231 242 254
Cash ow from operating activities 1468 3559 3769 4761 4501
Inc/dec in capital expenditure (2107) (2873) (5906) (3000) (2500)
Inc/dec in investments (462) (846) (1701) 521 610
Cash ow from investing activities (2569) (3720) (7607) (2479) (1890)
Inc/dec in borrowings 1602 372 908 (178) 219
Others 3 2865 1211 - -
Dividend paid (Incl Tax) (125) (173) (290) (363) (466)
Interest paid (246) (396) (351) (341) (355)
Cash ow from nancing activities 1234 2669 1479 (882) (603)
Net change in cash 132 2509 (2360) 1401 2008
Source: Company, Karvy Research, * includes exceptional item
Exhibit 14: Key Ratios
YE Mar FY16 FY17 FY18 FY19E FY20E
EBITDA Margin (%) 9.4 10.9 11.9 12.1 12.1
EBIT Margin (%) 5.7 7.1 8.3 8.7 9.1
Net Prot Margin (%) 4.2 4.8 6.1 6.6 6.9
Dividend Payout Ratio (%) 11.5 11.4 9.0 8.8 9.2
Debt/Equity (x) 0.7 0.6 0.4 0.3 0.3
RoE (%) 25.3 28.0 25.7 22.4 22.4
RoCE (%) 20.8 24.7 23.7 21.8 22.9
Source: Company, Karvy Research
Exhibit 15: Valuation Parameters
YE Mar FY16 FY17 FY18 FY19E FY20E
EPS (Rs.) 12.2 19.3 31.2 39.7 48.7
DPS (Rs.) 1.4 2.2 2.8 3.5 4.5
BVPS (Rs.) 297.3 91.7 159.9 195.4 238.8
PE (x) 16.4 23.0 40.9 32.2 26.3
P/BV (x) 0.7 4.8 8.0 6.5 5.4
EV/EBITDA (x) 48.6 30.2 21.7 18.3 15.6
EV/Sales (x) 4.6 3.3 2.6 2.2 1.9
Source: Company, Karvy Research; *Represents multiples for FY16 - FY18 are based on historic market price
Capex guidance for FY19E
is ~ Rs. 3000-3500 Mn
Board has declared 2:1
bonus shares which is
yet to be approved by the
shareholders
Higher capacity utilization
to maintain EBITDA
margins.
7
May 25, 2018
Minda Industries Ltd
Stock Ratings Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
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