Add Uno Minda Ltd for the Target Rs.1,300 By Emkay Global Financial Services Ltd
Growth tempers, though margin guidance intact; valuations rich
Uno Minda reported an in-line revenue performance at Rs48bn (+13% YoY), outperforming the underlying industry (H1FY26 revenue growth was 15%; 6% for the industry – PVs + 2Ws). That said, the company’s revenue outperformance vs key client MSIL tapered to 0.6% in Q2FY26 (17% in Q2FY25 and 9.5% in Q1FY26). Consolidated EBITDA grew 14% YoY to Rs5.5bn, 5% below our estimate, as higher employee costs and the 100bps QoQ contraction in gross margin offset topline gains. The management expects a healthy festive and wedding season to benefit the company, aided by ramp-ups in new product lines, deeper OEM penetration, and wallet-share gains. FY26 margin guidance of 11% ±50bps is intact, with the management confident of maintaining profitability despite the drag from newer facilities (still in ramp-up phase). We keep our earnings estimates largely unchanged. Valuations near 1SD above the LTA (trades at 38x Sep-27E PER) limit further upside; we retain ADD and raise our TP by ~8% to Rs1,300 (Rs1,200 earlier), at 38x Sep-27E PER (roll forward).
Revenue outperformance (vs key client MSIL) has tapered down
Revenue rose 13% YoY to Rs48bn (in line with Consensus/Emkay estimate). Consolidated EBITDA grew 14% YoY to Rs5.5bn (a 3% beat /5% miss vs Consensus/our estimate at Rs5.3bn/Rs5.8bn). EBITDA margin expanded by 10bps YoY (though down 64bps QoQ) to 11.5%. Revenue outperformance (vs key client MSIL) tapered down to 0.6% in Q2FY26 vs 17% in Q2FY25/9.5% in Q1FY26. APAT grew 29% YoY to Rs3bn (Consensus/Emkay estimate of Rs2.8bn/2.7bn) due to less-than-expected depreciation.
Earnings call KTAs
1) The early onset of festivities from 22-Sep and the extended festive/wedding season should help sustain growth for the auto industry in H2, per the management. 2) Uno Minda aims to continue its outperformance; H1FY26 revenue growth was 15%, 6% for the industry (PVs + 2Ws), led by ramp-up in newer products, entry into new OEMs, wallet share gains, and sustained growth in core products. 3) Margin guidance remains intact at 11% ±50bps for FY26 despite newer plants yet to reach optimal utilization and currently being in the ramp-up phase. 4) Switches – Growth was driven by an increase in market share and a favorable customer mix, supported by strong domestic volume growth in the 2W switch market. 5) Seating – A favorable customer mix in 2Ws, increased supply of suspended seats in the domestic market, and higher contribution from the bus passenger seat segment drove growth. 6) Lighting has been a key growth driver for Uno Minda; the performance was supported by ramp-up in products launched in recent quarters and the launch of a new rear lamp for a recently introduced OEM model. 7) Acoustics – Domestic revenue grew 15%, while EU revenue declined 13%. 8) Castings – Growth was driven by the ramp-up of newly commissioned capacities at the 4W alloy facility in Bawal and the 2W alloy facility in Supa; however, revenue was constrained due to falling aluminium prices (the benefit of which was passed on to customers).
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