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Margins impress in a tough quarter

Minda Corporation (MDA IN), in Q3, reported revenue of INR 12.5bn, up 7.4% YoY, but down 2.9% QoQ. EBITDA margin rose 32bps/10bps YoY/QoQ to 11.5%. Owing to ~27% revenue exposure to the CV segment (down by 1.8% YoY in Q3), the weighted average benchmark OEM production growth for MDA was just 3.3% and hence, an 7.4% YoY growth is impressive in that context. MDA is expected to continue to outperform in the OEM segment. Exports remained a drag in Q3 and due to geopolitical uncertainty, may remain muted. We tweak our FY25E-27E EPS estimates by 1-3%. We reiterate Accumulate with a higher TP of INR 638 (from INR 548)as we roll forward to Mar ’27E and raise multiple to 33x from 30x

Strategic partnership with Flash Electronics completed; synergies at play: MDA has acquired a 49% stake in Flash Electronics, a manufacturer of powertrain and EV components. Flash Electronics caters to the fastest-growing e-2W space, which will help MDA add powertrain vertical as a new domain (MDA is currently present only in body electronics). The deal will also help MDA in premiumization, increasing kit value and opportunity to gain more wallet share within the existing customers. MDA’s current value for e2Ws is in the range of INR 15,000-18,000 and with the help of Flash’s product offerings (kit value in the range of INR 30-35K), the combined kit value for powertrain specific e2W could reach to INR 30-35k. Post the acquisition, MDA’s net debt-to-equity is expected to be ~0.6x, and pro forma net debt-to-EBITDA ~1.8x.

EV orders account for 25% of orderbook: MDA expects macroeconomic challenges to check export growth, especially in Europe. Its lifetime orderbook was INR 12.50bn, with EV orders accounting for 25%. Through 9MFY25, orderbook was at a record >INR 60bn. In response to these growing orders, MDA is establishing four new facilities, two in die casting, one in the instrument cluster division, and one in wiring harness components

Reiterate Accumulate; TP raised to INR 638: Led by first-mover advantage in EV products, MDA supplies to major EV 2W firms. Its Smart Key solution is being adopted by ICE 2W OEMs, a key positive in hiking content per vehicle (realization for Smart Key at INR 2,500+ versus INR 400-600 for traditional locksets). The SANCO TLA should prop MDA’s position in the wiring harness division, and the strategic acquisition of Flash Electronics will help it spike the kit value as also the wallet share of existing customers.

The deal with Flash electronics will help unlock synergies and add powertrain electronics as a new division (MDA is currently present only in body electronics). We expect a revenue CAGR of 12% in FY24-27E, ahead of 2W industry volume CAGR of 9% and an EBITDA CAGR of 16% in the same period. Entering into new high-growth products (sunroof) may prop up valuation. Monitor recovery in exports growth, wherein MDA has trodden cautiously. We reiterate Accumulate with a higher TP of INR 638 as we roll forward to Mar ’27E and raise multiple to 33x from earlier 30x. Note that we are yet to factor in the financials of Flash Electronics.

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