06th June 2018

Outperformed the industry growth Q4FY18 revenue grew by 52.9%YoY led by positive effect of consolidation of group companies Mindarika Pvt Ltd (4W switches) & Denso Ten Minda Ltd (Car infotainment). Standalone business grew by 26%YoY due to superior product mix. EBITDA margin expanded by 68bps on account of operating efficiency and higher capacity utilization. Adj. PAT grew by 123%YoY. Despite policy changes industry registered a growth of 15%YoY in production for the full year FY18 and Minda outperformed by registering 32%YoY growth.

Strengthening leadership position in core segment During FY18 switching business grew by 36%YoY. After the consolidation MIL hold 65% market share in the switching business. Whereas lighting and horns grew by 19% & 14% mainly due to inorganic growth. MIL has robust capex plan of Rs 375cr for FY19 and 90% of consolidation exercise is over. Greenfields expansion for the lighting plant in Chennai to cater primarily to Renault Nissan has been approved and is expecting the tune of 55cr. Mexico plant for Clarton horns is started operational. We expect the consolidated Revenue to grow at 20% CAGR over FY18-20E led by higher contribution by core segments and incremental revenue from Alloy wheel, infotainments

Scaling up other business to drive growth

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. MIL expects to increase content per vehicle from BS-VI implementation like Engine sensors & advance filtrations and mandatory guidelines like Airbag and Reverse Parking System (RPS). Plant for the recently signed JV with Taiwanese TTE (RPS) to be start production by Mar 18.

Valuations On the back of strong earnings growth of 23%CAGR and ROE of ~27% by FY19E, we remain confident about the long term prospects of MI, but due to recent run up in stock price we see limited upside at current level. We upgrade our Revenue & PAT estimate for FY18/F19E by 6%/8% & 15% respectively, to factor in group consolidation of associate companies. We value at 26x on FY20E

EPS and arrive at a target price of Rs1,324 and upgrade to buy rating.

RETAIL EQUITY RESEARCH

Minda Industries Ltd Rating as per Midcap 12months investment period Automobile – Auto Ancillaries

BSE CODE:532539 NSE CODE: MINDAIND CMP Rs. 1,131 TARGET Rs. 1,324 RETURN 17%

Bloomberg CODE: MIN IN SENSEX: 34,903

Company Data

Market Cap (cr) Rs. 9,772

Enterprise Value (cr) Rs. 10,216

Outstanding Shares (cr) 8.6

Free Float 29%

Dividend Yield 0.46%

52 week high Rs. 1,357

52 week low Rs. 587

6m average volume (cr) 0.13

Beta 1.1

Face value Rs2

Shareholding (%) Q2FY18 Q3FY18 Q4FY18

Promoters 70.9 71.1 71.1

FII’s 7.8 8.2 9.5

MFs/Insti 7.3 6.7 6.0

Public 13.9 14.0 13.4

Total 100.0 100.0 100.0

Price Performance 3months 6months 1 Year

Absolute Return 17.4% 12.8% 113.3%

Absolute Sensex 2.3% 3.7% 12.3%

Relative Return* 15.1% 9.1% 101.0%

*over or under performance to benchmark index

Consolidated (Rs.cr) FY18A FY19E FY20E

Sales 4,471 5,405 6,351

Growth (%) 32.0 20.9 17.5

EBITDA 534 665 794

Margin (%) 11.9 12.3 12.5

PAT Adj 293 371 440

Growth (%) 78.7 12.3 18.5

Adj.EPS 293 371 440

Growth (%) 58.0 26.9 18.5

P/E 33.4 26.3 22.2

P/B 8.0 6.2 4.9

EV/EBITDA 19.1 15.4 12.8

ROE (%) 25.9 26.6 24.5

D/E 0.4 0.3 0.2

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MIL Sensex rebased

COMPANY UPDATE

Robust performance continues. Minda industries Ltd (MIL) is a diversified auto ancillary supplier, manufacturing products such as switches, horns, lights & others, having a leadership position in switch business with a market share of 67%. Q4FY18 consolidated revenue grew by 53%YoY led by consolidation,

switching & other divisions. Standalone revenue grew by 26%YoY.

EBITDA margin improved by 68bps on account of operating efficiency and higher capacity utilization in other business.

Scaling up the product line in Alloy wheels, Infotainment & Reverse parking system will drive growth for the company

Revenue to grow at 20% CAGR over FY18-20E led by higher contribution by core segments and incremental revenue from new products.

Strong outlook in the domestic auto market & outperforming the industry growth by twice in FY18 underlines MIL. We value at 26x on FY20E EPS

and arrive at a target price of Rs1,324 and upgrade to buy rating.

Buy

Saji John Analyst

Quarterly Financials

Profit & Loss Account

(Rs cr) Q4FY18 Q4FY17 YoY Growth % Q3FY18 QoQ Growth %

Sales 1,371 897 52.9 1,056 29.8

EBITDA 170 105 61.6 126 34.1

EBITDA margins 12.4 11.7 +70bps 12.0 +40bps

Depreciation 49 36 35.6 42 16.4

EBIT 121 69 75.1 84 42.9

Interest 14 8 78.5 7 98.4

Other Income 12 3 - 8 -

Exceptional Items - - - - -

PBT 157 64 145 85 84.9

Tax 23 12 90.2 24 -7.3

Share of profit from Associate 5 10 - 5 -

Reported PAT 140 63 122.5 66 111.7

Adjustments - - - - -

Adj PAT 140 63 122.2 66 111.7

No. of shares (cr) 8.6 7.9 - 8.6 8.6 EPS (Rs) 16.3 7.9 104.2 7.7 111.7

Change in estimates

Old estimates New estimates Change %

Year / Rs cr FY19E FY20E FY19E FY20E FY19E FY20E

Revenue 5,089 5,849 5,405 6,351 6.2 8.4

EBITDA 626 731 664 794 3.9 1.6

Margins (%) 12.3 12.5 12.3 12.5 - -

PAT 323 382 371 440 14.9 15.1

EPS 37.4 44.2 43.0 50.9 14.9 15.1

Consolidated Financials Profit & Loss Account

Y.E March (Rs cr) FY16A FY17A FY18A FY19E FY20E

Sales 2527 3386 4471 5405 6351

% change 13.5 34.0 32.0 20.9 17.5

EBITDA 238 374 534 665 794

% change 54.1 57.3 42.7 24.5 19.4

Depreciation 89 132 161 193 221

EBIT 145 238 369 468 568

Interest 26 40 35 34 34

Other Income 14 14 33 38 30

PBT 139 212 405 471 565

% change 63.7 52.8 91.4 16.2 19.8

Tax 28 46 98 125 150

Tax Rate (%) 20.0 21.9 24.1 26.5 26.5

Reported PAT 111 185 331 371 440

Adj* 5 0 38 0 0

Adj PAT 106 185 293 371 440

% change 105.9 74.7 58.0 26.9 18.5

No. of shares (cr) 7.9 7.9 8.6 8.6 8.6

Adj EPS (Rs) 13.4 23.3 33.9 43.0 50.9

% change 105.9 74.7 45.1 26.9 18.5

DPS (Rs) 1.7 1.7 1.5 1.5 1.6

Cash flow

Y.E March (Rs cr) FY16A FY17A FY18E FY19E FY20E

Net inc. + Depn. 231 387 570 668 790 Non-cash adj. 22 0 0 0 0 Changes in W.C -108 -35 48 -304 -178 C.F.O 146 313 618 365 612 Capital exp. -179 -522 -658 -280 -380 Change in inv. -9 -11 -34 8 -14 Other invest.CF -11 0 0 0 0 C.F - investing -257 -514 -705 -247 -381 Issue of equity 0 392 -97 0 19 Issue/repay debt 160 99 -8 -8 -8 Dividends paid 0 1 10 12 12 Other finance.CF -23 24 0 0 0 C.F - Financing 123 501 -119 -21 -2 Chg. in cash 13 335 -205 97 229 Closing cash 34 340 134 231 460

Balance Sheet

Y.E March (Rs cr) FY16A FY17A FY18E FY19E FY20E

Cash 34 369 134 231 460

Accounts Receivable 364 524 612 740 870

Inventories 184 251 295 347 407

Other Cur. Assets 42 19 21 22 26

Investments 44 55 89 81 95

Gross Fixed Assets 1,388 1,888 2,388 2,768 3,138

Net Fixed Assets 558 926 1,265 1,447 1,601

CWIP 130 147 300 200 200

Intangible Assets 9 10 11 12 13

Def. Tax (Net) 7 7 7 7 7

Other Assets - - - - -

Total Assets 1,484 2,448 2,883 3,281 3,909

Current Liabilities 178 192 282 296 348

Provisions 50 86 88 107 125

Debt Funds 353 452 444 436 428

Other Liabilities 321 515 710 726 853

Equity Capital 19 16 17 17 27

Reserves & Surplus 452 1,052 1,202 1,560 1,987

Shareholder’s Fund 472 1,068 1,219 1,577 2,014

Total Liabilities 1,484 2,452 2,883 3,281 3,909

BVPS (Rs) 58 133 140 181 232

Ratios

Y.E March FY16A FY17A FY18E FY19E FY20E

Profitab. & Return

EBITDA margin (%) 9.4 11.0 11.9 12.3 12.5

EBIT margin (%) 5.7 7.0 8.3 8.7 8.9

Net profit mgn.(%) 4.2 5.5 6.5 6.9 6.9

ROE (%) 25.3 24.5 25.9 26.6 24.5

ROCE (%) 14.4 13.6 15.4 16.3 15.9

W.C & Liquidity

Receivables (days) 47.2 47.9 46.4 45.7 46.3

Inventory (days) 23.4 23.4 22.3 21.7 21.7

Payables (days) 42.5 45.1 50.0 48.5 45.4

Current ratio (x) 3.2 4.6 3.3 3.8 4.2

Quick ratio (x) 2.0 2.7 2.2 2.5 2.5

Turnover &Levg.

Gross asset T.O (x) 2.0 2.1 2.1 2.1 2.2

Total asset T.O (x) 2.0 1.7 1.7 1.8 1.8

Int. covge. ratio (x) 5.7 6.0 10.5 13.6 16.9

Adj. debt/equity (x) 0.7 0.4 0.4 0.3 0.2

Valuation ratios

EV/Sales (x) 3.7 3.0 2.3 1.9 1.6

EV/EBITDA (x) 39.2 27.3 19.1 15.4 12.8

P/E (x) 84.7 48.4 33.4 26.3 22.2

P/BV (x) 19.0 8.6 8.0 6.2 4.9

Recommendation Summary (last 3 years) Dates Rating Target

31-March-2017 Buy 510

24-May-2017 Accumulate 606

16- November 2017 Hold 1097

1st –March 2018 Accumulate 1273

6- June 2018 Buy 1324

Source: Bloomberg, Geojit Research

Investment Rating Criteria Large Cap Stocks; Mid Cap and Small Cap;

Buy - Upside is above 10%. Hold - Upside is between 0% - 10%. Reduce - Downside is more than 0%. Neutral - Not Applicable

Buy - Upside is above 15% Accumulate - Upside is between 10% - 15%. Hold - Upside is between 0% - 10%. Reduce/Sell - Downside is more than 0%. Neutral - Not Applicable

To satisfy regulatory requirements, we attribute ‘Accumulate’ as Buy and ‘Reduce’ as Sell The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock always carries the risk of being upgraded to BUY or downgraded to a HOLD, REDUCE or SELL.NEUTRAL-The analyst has no investment opinion on the stock, under review.

General Disclosures and Disclaimers

CERTIFICATION

I, Saji John, author of this Report, hereby certify that all the views expressed in this research report reflect our personal views about any or all of the subject issuer or securities. This report has been prepared by the Research Team of Geojit Financial Services Limited, hereinafter referred to as Geojit.

COMPANY OVERVIEW

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Geojit and/or its Affiliates and its officers, directors and employees including the analyst/authors shall not be in any way be responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Investors may lose his/her entire investment under certain market conditions so before acting on any advice or recommendation in these material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. This report does not take into account the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who may receive this document. The user assumes the entire risk of any use made of this information. Each recipient of this report should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this report (including the merits and risks involved). The price, volume and income of the investments referred to in this report may fluctuate and investors may realize losses that may exceed their original capital.

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We have prepared this report based on information believed to be reliable. The recommendations herein are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. The stocks always carry the risk of being upgraded to buy or downgraded to a hold, reduce or sell. The opinions expressed are subject to change but we have no obligation

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to tell our clients when our opinions or recommendations change. This report is non-inclusive and does not consider all the information that the recipients may consider material to investments. This report is issued by Geojit without any liability/undertaking/commitment on the part of itself or any of its entities. We may have issued or may issue on the companies covered herein, reports, recommendations or information which is contrary to those contained in this report.

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Geojit’s Associates consists of privately held companies such as Geojit Technologies Private Limited (GTPL- Software Solutions provider), Geojit Credits Private Limited (GCPL- NBFC Services provider), Geojit Investment Services Limited (GISL- Corporate Agent for Insurance products), Geojit Financial Management Services Private Limited (GFMSL) & Geojit Financial Distribution Private Limited (GFDPL), (Distributors of Insurance and MF Units).In the context of the SEBI Regulations on Research Analysts (2014), Geojit affirms that we are a SEBI registered Research Entity and in the course of our business as a stock market intermediary, we issue research reports /research analysis etc that are prepared by our Research Analysts. We also affirm and undertake that no disciplinary action has been taken against us or our Analysts in connection with our business activities.

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