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EBITDA tops estimates; outlook remains intact

* Q4 EBITDA declined by 9% yoy to Rs2.8bn, 5% above our estimates owing to a higherthan-expected gross margin. Revenue grew by 8% to Rs24.2bn (est.: Rs23.7bn), slightly above estimates due to higher revenues in switches and acoustics.

* We expect growth momentum to continue over FY22-24E, with a revenue CAGR of 22%, driven by 1) a cyclical upturn in underlying PV/2W segments; 2) higher content/vehicle in core businesses, such as switches, lightings and acoustics; 3) improving presence in alloy wheels, sensors and controllers; and 4) growing content/vehicle led by EV penetration.

* We build in an FY22-24 earnings CAGR of 51%. RoIC is likely to expand from 11% in FY22 to 20% in FY24E, supported by improved profitability in the core and emerging segments. Net debt-to-equity should improve from 0.2x in FY22 to 0.1x in FY24E.

* Recommend Buy with a DCF-based TP of Rs1,135 (unchanged), based on 38x Jun’24E EPS (earlier 40x Mar’24E EPS). We reduce the target multiple to account for an increase in the cost of equity.

EBITDA tops estimates:

Revenue grew by 8% yoy to Rs24.2bn (est.: Rs23.7bn), slightly above estimates. Revenue has increased in lighting, castings and other segments, while it has declined in the switches, acoustics and seating segments. EBITDA margin contracted by 210bps to 11.4% (est.: 11%), above estimates. The company has indicated a partial pass-through of commodity inflation. Overall, PAT grew by 4% to Rs1.4bn (est.: Rs1.2bn), above estimates due to higher operating profit, other income and profit from associates. Profit from associates rose 37% to Rs295mn.

Order wins continued in Q4FY22:

1) Received orders for new generation switches for sunroof, cruise control, paddle and vehicle stability from PV OEM and export orders from an Italian 2W OEM; 2) Lighting order book up by Rs1bn to Rs3.5bn led by tail lamp order from an Indian OEM and LED lamps; 3) Received orders for speakers and tweeter from an Indian OEM; 4) Received a seating order from E-bus OEM; 5) Received an order for accelerator pedal position sensors from American 2W OEM; and 6) Received orders for chargers from existing OEMs. Management reiterated that EV business revenue is expected to increase from less than Rs1bn in FY22 to Rs15-20bn in 5-6 years, catering to both domestic and overseas markets.

Retain Buy

with a TP of Rs1,135. MNDA is focusing on strengthening its own R&D capabilities and exploring tie-ups and acquisitions with a focus on PACE opportunities (Personalization, Autonomous, Connected and Electrification). Key risks: lower-thanexpected growth in the underlying automobile industry, increase in competitive intensity, regulatory changes allowing cheaper imports, supply constraints at company and customer-end, slower premiumization rate, and adverse currency rates.

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