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Multiple triggers to drive outperformance

* We interacted with Mr. Aakash Minda, Executive Director, and Mr. Suresh D, CTO of Minda Corporation. The company has a strong presence in segments such as locks, wiring harness, instrument clusters and aluminum die-casting. It is targeting the EV space, with potential content per vehicle of Rs16,000-20,000 for E-2Ws, through the supply of existing and new products, such as power electronics, chargers, BMS and controllers.

* Management expects to outpace underlying auto industry growth by 10-15% in the next few years, led by increasing content per vehicle, helped by new products, premiumization and regulatory changes, across domestic and overseas markets. Profitability is likely to improve in the next three years, with EBITDA margins of 12%+ and ROCE of 25%+.

* EV revenues are expected to be Rs200mn+ in FY22, Rs1bn+ in FY23 and Rs2bn+ in FY24. In 9MFY22, Minda garnered lifetime orders worth Rs8.4bn. The key customers include Bajaj Auto, TVS Motors, Ola Electric and Ampere.  Current valuation multiples are reasonable in comparison with peers, with the stock trading at 18x/14x FY23E/24E consensus estimates. Balance sheet is healthy, with Net debt/EBITDA (TTM) at 0.2x as of Dec’21. The stock is not under Emkay coverage.

Key takeaways from Management meet and Plant/R&D center visit:

* New product development has been the focus area, with aggressive efforts at the R&D center, collaborations (tie-ups/JVs) and investments in start-ups. Minda should get PLI scheme incentives. So far, it has applied for incentives for 17 products under the scheme. The government may add more products to the scheme in the future.

* Minda is focusing on several products, including 2W/4W keyless solutions, telematics systems, digital clusters, sensors (side stand, rain/light, TPMS, etc.), 2W advanced driver assistance systems, EV parts (power electronics, BMS, chargers, controllers), antennas, kinematics, die-casting parts (motor/battery housings) and other engineering solutions.

* Expects 2W keyless systems adoption from incumbent players from FY23. It is working on 28 programs for 10+ customers. The keyless solution can increase content by up to 4- 5x to ~Rs2,500.

* EV penetration is driving the adoption of digital clusters (LCD/TFT) and the company expects penetration levels to increase in the medium term. It expects to sustain market share in the shift toward digital clusters. Digital clusters can increase content by up to 4- 5x to ~Rs3,000 for 2Ws.

* Shark-fin antenna adoption increases content by up to 2-3x. It has been able to win orders from marquee OEMs such as Hyundai, Kia and Tata Motors.

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