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Q2FY24 performance for UNO Minda was better than expected on all fronts backed by ramp up of new capacity in alloy wheel segments. The company registered a top line growth of 25.9% YoY to Rs.36.2bn (est. of 34.3bn) supported by strong growth in casting and lighting segment. During the quarter, the company achieved the highest ever production of 2W Alloy Wheel and 4W Alloy Wheel. Gross profit for the quarter was up by 23.1% YoY and EBIDTA grew by 26.1% YoY to Rs.4.01bn. EBIDTA margin for the quarter remained flat on YoY basis to 11.1% vs (est of 11.1%). Despite commissioning of a new plant which is under ramp up stage, the company is able to manage margin above 11%. Profit from associates increased to Rs.405mn compared to Rs. 229mn in Q1FY24 and PAT for the quarter jumped by 32.3% YoY to Rs.2.25bn.

View and Valuation: UNO Minda is in healthy growth trajectory led by various factors such as increasing kit value (comprising of more EV products), premiumisation trend in personal mobility, expansion into high-value growth products, addition of new clients and margin improvement achieved through localization efforts for products such as sensors, controllers, BMS, and ADAS product portfolio. However, going forward as company is adding new capacities, it will compress margin in the short term. Additionally, the company is transitioning a greater focus on premium and EV-related components, given the initial high import content will push back the margin efficiency effort. Further, at the current high valuation, we believe most of the positives are already factored in and leave limited upside from here. We introduce FY26 estimates and roll forward valuation to Sep-25E to arrive at a target price of Rs. 629, (38x of SepFY25E EPS) and recommend ADD rating.

Positive shift in Alloy wheel and Lighting: The company is adding up the new greenfield capacity in 4W alloy wheel in addition to the Bawal and Pune (2W alloy wheel) facility and 4W lighting in Vietnam and Pune. Overall penetration in the 4W segment in India is around 40-45% vs global penetration of 90-95%, and the management expects penetration in India to reach 70-75% over next 5-7 years. In the lighting segment management anticipates further revenue improvement in the upcoming quarters, driven by the commencement of production for a new customer. As penetration of LED lighting in vehicles is increasing, LED lights are getting more technically advanced and in some vehicles tail LED lighting is higher than front LED lighting due to technological advancement and new features. The company’s casting segment is also in a healthy growth phase, driven by several factors viz. increasing penetration of alloy wheels in both the 2W and PV, rising demand for alloy wheels in the replacement sector, and capacity expansion. Currently the company has 10% market share in 2W alloy and is aiming to reach 16% in the coming year.

Quarterly performance

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