MindaCorp PYT HemSec

7/21/2019 MindaCorp PYT HemSec

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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY

Company Report

Minda Corporation Ltd. 29th

December, 2015 BUY

For Private Circulation Only 1 Hem Research

CMP Rs.89.40

Target Price Rs.120.00

BSE Code 538962

Market Cap (Rs Cr.) 1871.14

52 Week High/Low 99.80/68.50

Industry Auto Ancillaries

Face Value Rs.2.00

Shares O/S 20.93 Cr.

EPS(TTM) 4.36

Book Value 23.78

P/E 20.50

P/B 3.76

Shareholding Pattern

Research Analyst: Vineeta Mahnot [email protected]

Minda Corporation Ltd. is a leading automotive componen

company. It has a diversified product portfolio that encompasses

Safety, Security & Restraint Systems; Driver Information &

Telematics Systems and Interior Systems for auto OEMs. These

products cater to 2/3 wheelers, passenger vehicles, commercia

vehicles and after-market.

The company has registered decent results for the quarter ending

September 2015. The consolidated revenues grew by 27.16% to

Rs.616.22 crores vs. Rs.484.59 cr. in the year ago quarter while igrew ~17% q-o-q. The growth was due to the combined effect of

new products that started during the year and of increase in the

share of business of few of the existing customers. Operating

profit too grew sharply by 29% at Rs.58.56 crores as against

Rs.45.43 crores in the preceding quarter while it climbed 24% on a

q-o-q basis. The company’s continued focus on value added

products coupled with the ongoing cost optimization initiatives

helped the profits. The adjusted net profit surged at Rs.23.04

crore as against Rs.21.73 crore; registering growth of mere 6% on

a y-o-y basis while it surged by 30% as compared to like quarter

last year mainly attributed to lower interest outgo. Interesexpense decreased on account of better cash management, lower

working capital requirements and repayment of term loan.

Minda Corporation achieved a higher growth on the back of new

business and strong performance by Wiring Harness, After

Market & Die Casting operations.

Valuation

New product launches through technological advances and

developments, client addition, increasing penetration in newterritories, operational efficiency, capacity expansion and improving

financial metrics bodes well for the company growth going forward

We believe the company is trading at an attractive valuation at 16.87x

and 11.49x of FY16EPS of Rs.5.30 and FY17EPS of Rs.7.78. We initiate

a ‘BUY’ on the stock with a target price of Rs. 120 (appreciation of

about 34%) with the medium to long term investment horizon.



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Business overview

Minda Corporation is a leading automotive component and

flagship company of Spark Minda, Ashok Minda Group,

which was founded in 1958 by Late Shri S. L. Minda. The

company is a diversified company with a product portfolio

encompassing from Mechanical & Electronic Security System,

Electronic Controllers for Electric Vehicles and for Auto

OEM's across the Globe. It also manufactures Die Casting

Parts for auto and consumer durable industry. The Company

is one of the largest suppliers of 2 wheeler, 3 wheeler and Off

Road vehicles Electronic & Mechanical Security System to

OEM's and exports about 20% of its products to USA, UK,Europe & South East Asia and ASEAN countries.

Headquarter at Noida, Minda Corporation Limited is an

erstwhile Joint Venture with Huf Hülsbeck & Fürst GmbH & Co. KG, Germany.

It is the only company in India to have its own patented Magnetic Shutters for 2 wheeler application. To enhance the

vehicle security it manufactures Lock Sets with conventional keys, 2 Track Keys, 4 Track Keys & Snake Biting Keys for

2 Wheeler Applications. The company designs & manufactures Immobilizers for 2 wheeled vehicle applications and

also has patent for the Immobilizer application for vehicles operating with drained or no battery condition.

Strong customer base including key OEMs: Ashok Leyland,

Bajaj, BMW, Daimler, Hero MotoCorp, Honda Motorcycle,

Mahindra & Mahindra, Maruti Suzuki, Renault Nissan, Tata

Motors, TVS Motors, Yamaha and VW Group. The Company

has 29 state of the art manufacturing facilities - India (24),

South-East Asia (2) and Europe (3) and a representative office

in Japan with a workforce of over 10,000.

The company has a separate Die Casting Division with

manufacturing facilities like GDC, LPDC, HPDC for

Aluminum & Zinc Hot Chamber Die Casting under one roof.

The casting facility is supported with state of the artmachining centers for supply of fully finished products. All other related facilities like Die design & manufacturing,

Core making, Heat Treatment (T6), Shot blasting, Powder coating, etc. are in- house. Product range includes

Compressor Housings for Turbo Chargers, Upper Brackets & Handle Holders used in premium segment bikes, Brake

Calipers, Master Cylinders, TMC, In- take manifold, etc.



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New order wins in line with product portfolio expansion

Minda Corporation’s continuous focus on technology,

research and development helped it to procure orders

for supply of ABS wiring harness to some of the leading

CV OEMs. Further, with the tightening in regulatory

requirement for safety equipment, there will be strong

growth in the demand for these high value added

product lines. In line to it, in Germany the company has

secured a couple of new business from BMW and Audi.

The company’s European subsidiary, Minda KTSN has

a couple of sizeable orders from VW for the models

which are expected to be launched in 2016-17 or 2017-

2018. The company is in the process of evaluating the

proposal on account of profitability, entry in new

territories like china and Mexico and new production

locations. Further, the company has also started a couple of new products during the last six months under the

aftermarket segment namely filters, control cables etc. The company also started the sensor business this year which is

witnessing a good response. The market for the various sensors for the year 2015-16 is about Rs.1,400 crores in India.

Sensors which are used in passenger vehicles, two-wheelers and many other vehicles; Minda corporation has only

about 3 to 4% of market share. The company started this business this year only and invested a good amount of money

to build a world class facility in Pune. This sensor business is continuously supported by the JV partner through with

it focuses on technology for new product development and improvement in existing product. Given that the company

already has orders and new products are under development, the company may have good growth over the next two-three years both in topline and bottomline. The major customers currently in this space are Hero Motor Corporation,

Tata Motors and Mahindra & Mahindra. The company plans to roll out these sensors to other OEMs too which will

increase their market share to 8-9% in the next three years.



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Strong growth ahead

Revenues for the first half of the current financial year stood at Rs.1,144 crores which is expected to increase by 25-

30%; thereby turning into about Rs.2,500 crores for the full year. With the launch and start of supply of new products

with the OEMs in the area of wiring harness; there is scope in improvement in EBIDTA margins going forward.

Further, operational efficiency owing to lowering of the costs, margins are expected to improve by at least half

percentage by the end of the year. Minda SAI (a 100% subsidiary of Minda Corporation) has acquired 51% equity of

Minda Stoneridge Instruments Ltd. in Q2FY16. FY2017 will witness a strong growth and 11% of margins on the back

of a full year impact of this acquisition combined with an introduction of a couple of good products in die-casting and

security segments. Further, the company expects good business from HeroMoto Corporation and Bajaj in die casting

segment. The sensor business is witnessing a good response and has good customers too which may increase its

market share form 3-4% to 8-9% in about three year’s time. Further, the new products launched under the aftermarket

segment namely filters and control cables are expected to be about Rs.35-40 crores in this financial year. On thefinancial parameters, the company expects to improve its debt equity ratio as it is retiring its debt by about 27-30

crores every year. The company already has a huge built up space available in all its existing 29 plants in India;

thereby capex would not be more than Rs.40-45 crores annually. The average tax rate is expected to stay around 30-

33%. Riding the power of a much healthy balance sheet, new products, new clients, new geographies; the company

aims to achieve Rs.5000 crore of turnover in the coming three-four years timeframe.



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Consolidated Profit & Loss AccountRs. Crore

Particulars FY13 FY14 FY15 FY16E FY17E

Net sales 2173.58 1593.91 1970.64 2463.30 3098.83

Growth -26.67% 23.64% 25.00% 25.80%

Expenditure 2064.88 1468.16 1785.09 2224.36 2782.75

EBITDA 108.70 125.75 185.55 238.94 316.08

Growth 15.69% 47.55% 28.77% 32.28%

EBITDA margin 5.00% 7.89% 9.42% 9.70% 10.20%

Other income 36.20 30.38 22.67 19.71 21.69Depreciation & Amortisation 77.05 47.80 60.26 70.07 76.59

EBIT 67.85 108.33 147.96 188.58 261.18

EBIT margin 3.12% 6.80% 7.51% 7.66% 8.43%

Interest 42.43 27.51 39.46 35.53 34.18

PBT 25.42 80.82 108.50 153.05 227.01

Tax 17.47 17.20 27.15 39.79 61.29

PAT 7.95 63.62 81.35 113.26 165.71

Share of Associates 0.00 0.98 4.43 0.00 0.00

Minority Interest (1.03) 0.00 (1.37) 2.30 2.80

Adjusted PAT 8.98 64.60 87.15 110.96 162.91Growth 619.46 34.91 27.32 46.82

Net Profit margins 0.41 4.05 4.42 4.50 5.26

Exceptional item 2.98 (14.75) (2.38) 0.00 0.00

Reported PAT 6.00 79.35 89.53 110.96 162.91

Equity Capital 20.40 20.26 41.46 41.86 41.86

Res. & Surplus 1013.08 1015.08 1308.63 1,392.62 1,492.13

Equity Shares 2.04 2.03 20.73 20.93 20.93

Adjusted EPS* 0.43 3.12 4.20 5.30 7.78* Adjusted for current no. of equity shares



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Balance Sheet

Rs. CroreParticulars FY13 FY14 FY15 FY16E FY17E

Equity Share Capital 20.40 20.26 41.46 14.46 14.46

Preference Capital 19.20 19.20 19.20 19.20 19.20

Reserves & Surplus 306.61 349.93 405.90 504.30 650.47

Shareholders’ funds 346.21 389.39 466.56 537.96 684.13

Borrowings 531.87 552.33 501.85 473.71 455.71

Deferred tax liability 10.34 8.59 5.70 5.70 5.70

Minority Interest 5.12 0.00 24.15 25.60 25.76

Sources of funds 893.54 950.32 998.25 1042.97 1171.30

Gross block 902.30 987.05 1,032.26 1094.80 1178.26

Accumulated Depreciation 435.81 460.26 461.46 531.53 608.12

Net block 466.49 526.78 570.80 563.27 570.14

Capital WIP 67.68 15.02 15.32 19.36 23.82

Investments 0.00 24.52 28.91 30.65 37.70

Inventories 252.74 186.65 230.77 270.47 320.61

Sundry debtors 305.49 291.48 317.62 368.02 438.16

Cash and bank balance 57.50 54.02 44.11 44.34 53.43

Other current assets 7.30 10.50 19.65 4.43 21.37

Loans and advances 115.73 203.20 194.41 199.53 235.11

Total current assets 738.76 745.86 806.56 886.79 1068.68

Current liabilities andprovisions 379.40 361.86 423.33 457.11 529.05

Net current assets 359.36 383.99 383.22 429.68 539.63

Uses of funds 893.54 950.32 998.25 1,042.97 1,171.30

Ratios

Particulars FY13 FY14 FY15 FY16E FY17E

Return on Equity 2.75 17.45 19.48 21.39 24.50

Return on Capital employed 7.73 11.50 15.28 18.64 22.91Debt/Equity 1.63 1.49 1.12 0.91 0.69

Asset turnover 1.71 1.21 1.39 1.64 1.82

Current Ratio 1.95 2.06 1.91 1.94 2.02

Interest coverage 1.60 3.94 3.75 5.31 7.64



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Consolidated Quarterly Financial Highlights

Rs. Crore

Particulars Q2FY16 Q2FY15 Q1FY16 YoY% QoQ%

Revenues 616.22 484.59 528.07 27.16 16.69

Expenditures 557.66 439.16 480.85 26.98 15.97

Operating Profit 58.56 45.43 47.22 28.90 24.02

Adjusted Net Profit 23.04 21.73 17.7 6.03 30.17

Exceptional item 6.02 --- 2.54 ---- ----

Reported PAT 29.06 21.73 20.24 33.73 43.58OPM% 9.50 9.37 8.94 13bps 56bps

NPM % 3.74 4.48 3.35 (110bps) 39bps

Adjusted EPS* 1.10 1.04 0.85 5.77 29.41*Adjusted for current number of equity shares

Past Price movement of the stock

23 2

2015

9 16 23 30 13

April

2 0 2 7 4 1 1

May

21 1

June

15 29 6

July

13 2 0 27 3 10

August

17 2 4 31 7 14

September

2 1 2 8 5 1 2

October

19 26 2 9 16

November

2 3 3 0 7 14

December

21 2 8 4 1 1

2016

66

67

68

6970

71

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6970

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102MINDA CORPORATION (91.2000, 91.4000, 89.1500, 89.4000, -0.9000)



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[email protected]

HEM SECURITIES LIMITED

MEMBER-BSE,CDSL, SEBI REGISTERED CATEGORY I MERCHANT BANKER

Sebi Registration No For Research Analyst: INH100002250

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PHONE- 0091 22 2267 1000 FAX- 0091 22 2262 5991

JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001

PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757

GROUP COMPANIES

HEM FINLEASE PRIVATE LIMITEDMEMBER-NSE

HEM MULTI COMMODITIES PRIVATE LIMITEDMEMBER-NCDEX, MCX

HEM FINANCIAL SERVICES LIMITED

NBFC REGISTERED WITH RBI

http://www.hemonline.com/

mailto:[email protected]

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securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly

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Disclosure of Interest Statement Company Name

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3. Hem & its Group Companies’ Director Ownership of the Stock No

4. Broking relationship with company covered No

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MindaCorp PYT HemSec