1
May 31, 2018
Minda Corporation Ltd
India Research - Stock Broking
HOLD
Recommendation (Rs.)
CMP (as on May 30, 2018) 180
Target Price 205
Previous Target Price 229
Upside (%) 14
Stock Information
Mkt Cap (Rs.mn/US$ mn) 41309 / 611
52-wk High/Low (Rs.) 229 / 98
3M Avg. daily value (Rs. mn)
80.9
Beta (x) 1.0
Sensex/Nifty 34906 / 10614
O/S Shares(mn) 227.2
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 64.7
FIIs 6.3
DIIs 8.0
Others 21.1
Stock Performance (%)
1M 3M 6M 12M
Absolute (2) (3) (7) 78
Relative to Sensex (1) (6) (12) 58
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 24455 20598 25934 31265 37725
EBITDA 2233 1887 2728 3307 4054
EBITDA Margin (%) 9.1 9.2 10.5 10.6 10.7
Adj. Net Prot 935 1021 1416 1776 2216
EPS (Rs.) 4.5 4.9 6.8 8.5 10.6
EPS (Rs.) Post QIP 4.1 4.5 6.2 7.8 9.8
RoE (%) 18.1 17.2 20.8 18.3 16.9
PE (x) 43.7 40.0 28.8 23.0 18.4
Source: Company, Karvy Research, * IND AS accounting standards
Consistent Order Book Assures Revenue Growth
The order book build-up during FY18 was Rs. 42.2 Bn which is expected to be
executed over the next six years translating to ~7 Bn per year. Based on this,
we estimate revenue to grow at a CAGR of 20.6% during FY18-20E across the
segments with an EPS growth of 25.1%. Despite strong order pipeline, we believe
that the company’s working capital cycle is getting longer which is impacting the
cash conversion cycle. The debt in the books can be attributed to recent acquisitions
and capacity expansion which can be justied by the company’s group structure.
Furthermore, the automotive industry is at a mid cycle phase and the upcoming
BS VI norms is expected to support higher growth rates. Though we are optimistic
about the future growth prospects of the company, the valuation seems to have
factored in the price. Therefore, we recommend a “HOLD” for the stock with a 14%
upside.
Quarterly Performance above our estimates: Minda Corporation Ltd (MCL)
reported revenue of Rs. 7205 Mn during Q4FY18, higher by 39.9% YoY driven by
growth across all three segments i.e. Safety & Security Systems, Driver Telematic
and Interior Systems. EBITDA margin improved by 390 bps to 11.4% driven by
better operational eciencies at MINDA KTSN (interior plastics) and MINDA
SAI (wiring harness) which led PAT to grow by 137% YoY. During the quarter, the
company received orders worth Rs. 13.6 Bn.
Raises QIP of Rs. 3100 Mn: MCL recently raised Rs. 3100 Mn through a Qualied
Institutional Placement with an objective to fund acquisitions, repay debt and to
manage working capital requirements.
Valuation and Risks
Minda Corp is trading at a P/E of 18.4x for FY20E EPS of Rs. 9.8. We observe that
the company is equipped towards BS VI transition in FY20E and is also making
initiatives in the R&D space for future technology capturing the connected mobility
space. However, factoring in the potential risks at their subsidiary Minda Furukawa,
a 51% JV for manufacturing wiring harness, which reported loss of Rs. 77 Mn for
the year FY18 due to operating inconsistencies, we value MCL at P/E of 21x (as
compared to our previous valuation of 24.0x) based on the 3-year average 2-fwd
P/E of 16.0x for a target price of Rs. 205 with an upside potential of 14%.
Earnings Revision (%)
YE Mar FY19E FY20E
Sales (%) 10.6 18.3
EBITDA (%) 12.8 20.8
PAT (%) 8.3 11.0
Source: Karvy Research
L
L
L
L
L
L
Company Update
Industrials - Electrical Equipment
Minda Corporation Ltd
Bloomberg Code: MDA IN
80
120
160
200
240
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Mar -18
Apr-18
May-18
Minda Cor por ation Ltd
Sensex
2
May 31, 2018
Minda Corporation Ltd
Satefy Security Systems
and Driver Telematics
were the key growth
contributors.
Exhibit 3: Q4FY18
YE Mar (Rs. Mn) Q4FY18 Q3FY18 QoQ % Q4FY17 YoY %
Turnover 7205 6362 13.3 5150 39.9
Expenditure 6387 5645 13.2 4767 34.0
EBIDTA 818 717 14.1 384 113.2
Depreciation 196 194 0.9 142 37.9
Interest 106 101 5.3 69 53.3
Other Income 88 28 219.9 102 (13.1)
Share of Prot from JV (47) 50 (193.2) (89) (47.7)
PBT 558 500 11.5 185 201.7
Ta x 171 122 40.9 22 685.3
Adjusted Prot 387 379 2.1 163 137.1
EBITDA Margin (%) 11.4 11.3 8 bps 7.4 390 bps
EBIT Margin (%) 8.6 8.2 41 bps 4.7 394 bps
Net Prot Margin (%) 5.4 6.0 (59) bps 3.2 220 bps
Source: Company, Karvy Research
Exhibit 2: QIP Summary
Details
Amount Raised Rs. 3107 Mn
No. of shares allotted 17,910,645 Equity shares
Share premium (at Rs. 171.47 per equity share) Rs. 3071 Mn
Total No. of O/S 227,222,285 shares
Shareholding Pattern (%)
Before QIP Post QIP
Promoter 70.2 64.7
FII 2.3 6.3
DII 5.4 8.0
Others 22.1 21.0
Exhibit 4: Segment-wise Revenue Contribution
Source: Company, Karvy Research
Exhibit 5: Geographical split
Source: Company, Karvy Research
43%
45%
52%
47%
33%
32%
30%
32%
24%
23%
18%
21%
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Safety Security Systems
Driver Telematics
Interior Systems
73.0%
68.6%
22.5%
25.5%
4.5%
5.9%
0%
20%
40%
60%
80%
100%
FY17
FY18
India
Europe
South East Asia
Exhibit 6: Revenue break-down by product category
Source: Company, Karvy Research
Exhibit 7: Customer Split
Source: Company, Karvy Research
Safety and
Security
Systems
46.9%
Driver
Telematics
32.1%
Interior
Systems
21.0%
2&3
Wheelers
36.5%
Commercial
Vehicles
32.9%
Passenger
Vehicles
18.9%
After
Market
11.7%
3
May 31, 2018
Minda Corporation Ltd
3 Year Avg 1 Fwd P/E is
19.0x and 2 Fwd P/E is 16.
Exhibit 9: 3 Yr 2-Fwd P/E Band
Source: Bloomberg, Karvy Research
Exhibit 10: S&P 500 Automobile Component Industry PE Bands
Source: Bloomberg, Karvy Research
Exhibit 8: Change in Earnings Estimates
YE Mar (Rs. Mn)
FY19E FY20E
Old New % Change Old New % Change
Net Sales 28264 31265 10.6 31880 37725 18.3
EBITDA 2932 3307 12.8 3356 4054 20.8
EBITDA Margin (%) 10.4 10.6 20 bps 10.5 10.7 22 bps
Adj. PAT 1640 1776 8.3 1996 2216 11.0
EPS (Rs.) 7.8 7.8 0.2 9.5 9.8 2.7
Source: Karvy Research
0
100
200
300
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Price (Rs.)
14.8x
12.3x
9.8x
7.3x
4.8x
10
14
18
22
26
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan
-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
1 forward P/E
Average P/E
1SD
-1SD
4
May 31, 2018
Minda Corporation Ltd
Financials
Exhibit 11: Income Statement
YE Mar (Rs. Mn) FY16 *FY17 *FY18 FY19E FY20E
Revenues 24455 20598 25934 31265 37725
Growth (%) - - 25.9 20.6 20.7
Operating Expenses 22222 18711 23206 27958 33670
EBITDA 2233 1887 2728 3307 4054
Growth (%) - - 44.5 21.2 22.6
Dep & Amor 745 577 738 864 983
EBIT 1489 1310 1990 2443 3071
Other Income 173 405 163 187 215
Interest Expenses 334 269 371 427 499
PBT 1328 1446 1782 2203 2787
Tax 366 288 496 617 780
Prot from JVs - (137) 131 190 209
Minority Interest 33 0 0 0 0
Adjusted PAT 935 1021 1416 1776 2216
Growth (%) 7.3 9.2 38.6 25.4 24.8
Source: Company, Karvy Research, * IND AS accounting standards
Exhibit 12: Balance Sheet
YE Mar (Rs. Mn) FY16 *FY17 *FY18 FY19E FY20E
Cash & cash Equivalents 882 334 260 3032 3288
Trade Receivables 4353 3741 5705 6629 8254
Inventory 3210 3064 4479 4988 6435
Loans & Advances 1869 263 286 344 415
Other assets 23 851 1193 1563 1886
Net Block 7318 5071 6264 7360 8378
Investments 52 2228 2404 2404 2404
Total Assets 17707 15552 20591 26321 31059
Trade Payables 4256 2640 4409 5584 6473
Short & Long term Provisions 607 237 287 347 416
Total Debt 4591 4691 5916 6106 7129
Other Liabilities 2583 1764 2605 2201 2941
Total Liabilities 12036 9331 13216 14238 16959
Shareholders Equity# 607 416 416 452 452
Reserves & Surplus 5066 5805 6959 11631 13648
Total Networth 5672 6221 7374 12083 14100
Total Networth & Liabilities 17707 15552 20591 26321 31059
Source: Company, Karvy Research, * IND AS accounting standards, # adjusted for QIP proceeds during FY19E.
Increasing content per
vehicle to enhance future
growth prospects.
Asset turnover ratio to
be maintained above 4.0
levels.
5
May 31, 2018
Minda Corporation Ltd
Exhibit 13: Cash Flow Statement
YE Mar (Rs. Mn) FY16 *FY17E *FY18E FY19E FY20E
PBT 1328 1446 1782 2203 2787
Depreciation 745 577 738 864 983
Interest expense 334 269 371 427 499
Others 132 (396) (163) (187) (215)
Tax Paid (414) (288) (496) (617) (780)
Inc/dec in Net WC 133 (174) (1056) (1030) (1767)
Cash ow from operating activities 2257 1435 1176 1660 1507
Inc/dec in capital expenditure (914) (1729) (1931) (1960) (2000)
Inc/dec in investments (668) (50) (136) 0 0
Others (14) (3) 293 377 424
Cash ow from investing activities (1597) (1782) (1774) (1583) (1576)
Inc/dec in borrowings 142 100 1226 190 1023
Dividend paid (Incl Tax) (100) (126) (149) (174) (199)
Interest paid (332) (269) (371) (427) (499)
Redemption of shares 0 0 (191) 0 0
QIP - - - 3107 -
Cash ow from nancing activities (290) (296) 515 2695 325
Net change in cash 370 (642) (83) 2772 256
Source: Company, Karvy Research, * IND AS accounting standards
Exhibit 14: Key Ratios
YE Mar FY16 *FY17 *FY18 FY19E FY20E
EBITDA Margin (%) 9.1 9.2 10.5 10.6 10.7
EBIT Margin (%) 6.1 6.4 7.7 7.8 8.1
Net Prot Margin (%) 3.8 5.0 5.5 5.7 5.9
Dividend Payout Ratio (%) 12.1 11.1 9.6 9.0 8.2
Debt/Equity (x) 0.8 0.8 0.8 0.5 0.5
RoE (%) 18.1 17.2 20.8 18.3 16.9
RoCE (%) 15.4 12.4 16.4 15.5 15.6
Source: Company, Karvy Research, * IND AS accounting standards
Exhibit 15: Valuation Parameters
YE Mar FY16 *FY17 *FY18 FY19E FY20E
EPS (Rs.) 4.1 4.5 6.2 7.8 9.8
DPS (Rs.) 0.5 0.5 0.6 0.7 0.8
BVPS (Rs.) 25.0 27.4 32.5 53.2 62.1
PE (x) 43.7 40.0 28.8 23.0 18.4
P/BV (x) 6.6 6.0 5.1 3.1 2.7
EV/EBITDA (x) 20.8 24.6 17.0 14.1 11.5
EV/Sales (x) 1.9 2.3 1.8 1.5 1.2
Source: Company, Karvy Research, * IND AS accounting standards
Capex guidance is ~ at Rs.
2000 Mn.
EBITDA margin may
improve as we have
trickled down employee
expenses in our estimates.
6
May 31, 2018
Minda Corporation Ltd
Stock Ratings Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
Connect & Discuss More at
1800 419 8283 (Toll Free) research@karvy.com Live Chat
f
in
You
Tube
Disclaimer
y Analyst certication: The following analyst(s), Vivek Ranjan Misra, who is (are) primarily responsible for this report and whose name(s) is/are mentioned
therein, certify (ies) that the views expressed herein accurately reect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no
part of his (their) compensation was, is or will be directly or indirectly related to the specic recommendation(s) or views contained in this research report.
y Disclaimer: Karvy Stock Broking Limited [KSBL] is registered as a research analyst with SEBI (Registration No INH200003265). KSBL is also a SEBI
registered Stock Broker, Depository Participant, Portfolio Manager and also distributes nancial products. The subsidiaries and group companies including
associates of KSBL provide services as Registrars and Share Transfer Agents, Commodity Broker, Currency and forex broker, merchant banker and
underwriter, Investment Advisory services, insurance repository services, nancial consultancy and advisory services, realty services, data management,
data analytics, market research, solar power, lm distribution and production, proling and related services. Therefore associates of KSBL are likely to have
business relations with most of the companies whose securities are traded on the exchange platform. The information and views presented in this report are
prepared by Karvy Stock Broking Limited and are subject to change without any notice. This report is based on information obtained from public sources , the
respective corporate under coverage and sources believed to be reliable, but no independent verication has been made nor is its accuracy or completeness
guaranteed. The report and information contained herein is strictly condential and meant solely for the selected recipient and may not be altered in any
way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of KSBL. While we would endeavor to update the information herein on a reasonable basis, KSBL is under no obligation to update or keep the information
current. Also, there may be regulatory, compliance or other reasons that may prevent KSBL from doing so. The value and return on investment may vary
because of changes in interest rates, foreign exchange rates or any other reason. This report and information herein is solely for informational purpose and
shall not be used or considered as an oer document or solicitation of oer to buy or sell or subscribe for securities or other nancial instruments. Though
disseminated to all the customers simultaneously, not all customers may receive this report at the same time. KSBL will not treat recipients as customers by
virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or
strategy is suitable or appropriate to your specic circumstances. This material is for personal information and we are not responsible for any loss incurred
based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment
decisions based on their specic investment objectives and nancial position and using such independent advice, as they believe necessary. While acting
upon any information or analysis mentioned in this report, investors may please note that neither KSBL nor any associate companies of KSBL accepts any
liability arising from the use of information and views mentioned in this report. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Past performance is not necessarily a guide to future performance. Forward-looking statements
are not predictions and may be subject to change without notice. Actual results may dier materially from those set forth in projections.
y Associates of KSBL might have managed or co-managed public oering of securities for the subject company or might have been mandated by the subject
company for any other assignment in the past twelve months.
y Associates of KSBL might have received compensation from the subject company mentioned in the report during the period preceding twelve months from
the date of this report for investment banking or merchant banking or brokerage services from the subject company in the past twelve months or for services
rendered as Registrar and Share Transfer Agent, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory
services, insurance repository services, consultancy and advisory services, realty services, data processing, proling and related services or in any other
capacity.
y KSBL encourages independence in research report preparation and strives to minimize conict in preparation of research report.
y Compensation of KSBLs Research Analyst(s) is not based on any specic merchant banking, investment banking or brokerage service transactions.
y KSBL generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a nancial interest in the securities or derivatives of
any companies that the analysts cover.
y KSBL or its associates collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the
last day of the month preceding the publication of the research report.
y KSBL or its analysts did not receive any compensation or other benets from the companies mentioned in the report or third party in connection with
preparation of the research report and have no nancial interest in the subject company mentioned in this report.
y Accordingly, neither KSBL nor Research Analysts have any material conict of interest at the time of publication of this report.
y It is conrmed that KSBL and Research Analysts, primarily responsible for this report and whose name(s) is/ are mentioned therein of this report have not
received any compensation from the subject company mentioned in the report in the preceding twelve months.
y It is conrmed that Vivek Ranjan Misra, Research Analyst did not serve as an ocer, director or employee of the companies mentioned in the report.
y KSBL may have issued other reports that are inconsistent with and reach dierent conclusion from the information presented in this report.
y Neither the Research Analysts nor KSBL have been engaged in market making activity for the companies mentioned in the report.
y We submit that no material disciplinary action has been taken on KSBL by any Regulatory Authority impacting Equity Research Analyst activities.
Karvy Stock Broking Limited
Plot No.31, 6th Floor, Karvy Millennium Towers, Financial District, Nanakramguda, Hyderabad, 500 032, India
Tel: 91-40-2331 2454; Fax: 91-40-2331 1968
For More updates & Stock Research, visit www.karvyonline.com