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Strong order book led outperformance to continue…

About the stock: Minda Corporation (MCL) primarily serves auto OEMs across two main verticals – Mechatronics & Aftermarket (i.e. MCH – safety & security, die-casting, starter motors, etc) and Information & Connected Systems (i.e. ICS – mainly wiring harnesses and instrument clusters).

FY21 segment mix –2-W ~52%, CV ~21%, PV ~11%, Aftermarket ~16%

FY21 product mix – MCH ~58%, ICS ~42%

Key Highlights:

Steadily stepping up the game in the EV space with development of new products in-house. Potential kit value in electric 2-W seen at | 16,000- 20,000/unit from prevailing ICE 2-W kit value at | 4,000-4,500/unit

Increase in kit value envisaged through content increase in existing products as well as new product offerings. On-boarded marquee EV OEMs like Ola Electric (sole supplier of smart key), Hero Electric, Ampere among others

History of outgrowing base OEM industry in the past with further commitment to grow 10-15% ahead of industry volumes, going forward

What should investors do? MCL has been one of our early finds with stock price nearly 3x since our initiation in Dec 2020, vastly outperforming Nifty Auto Index

We retain BUY rating amid healthy growth prospects, going forward

Target Price and Valuation: Introducing FY24E estimates, we now value MCL at a revised target price of | 315 i.e. 25x P/E on FY24E EPS of (previous TP | 220)

Key triggers for future price performance:

Robust order wins (~| 4,232 crore lifetime orders for 9MFY22; replacement & new business combined; EV order win at | 843 crore) imparts healthy revenue visibility. We build 23.8% FY21-24E consolidated sales CAGR

Strong EV order book with two new EV OEMs (Hero Electric & BMW) added to list marking all prominent names in the EV space as its clients

Acquisition of JV’s stake in Stoneridge (for | 161 crore) to be margin and return ratios accretive. Consequent consolidated RoE, RoCE seen at 17-19% by FY24E. EBITDA margins are seen improving to 12.2% by FY24E

Alternate Stock Idea: Besides MCL, in our ancillary coverage we like Apollo Tyres

India CV revival beneficiary focused on debt reduction, higher return ratios

BUY with target price of | 270

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