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Steadily ramping capacity on all fronts

Strong all-round performance across segments

Uno Minda’s (UNOMNDA IN) Q3 revenue rose 21% YoY but dipped 3% QoQ to INR 35.2bn. UNOMNDA posted growth across all the segments on YoY basis. Revenue from lighting rose 32% YoY, from acoustics 21% YoY, Light metal (LMT) 21% YoY, switches 12% YoY, seating 7% YoY, and from others 29% YoY. EBITDA rose 12% YoY but dipped 6% QoQ to INR 3.8bn, with 30bps QoQ margin contraction to 10.8%. Gross margin expanded 60bps QoQ, but was offset by higher staff cost-sales ratio (up 50bps QoQ) and other expenses-sales ratio (up 40bps QoQ).    

New plant capacities and orders drive growth     

The new 2W alloy wheel plant is fully commissioned from Dec-23, aggregating to total 2.0mn capacity. Overall 2W alloy wheels capacity was 5.4-6.0mn. Revenue from PV alloy wheels declined due to dip in PV volumes QoQ at OEMs’ end. Phase 1 of UNOMNDA's switches greenfield project in Gurugram is expected to be completed in Q1FY25. It also received new EV orders with peak revenue of ~INR 2.5bn annually from EV OEMs. UNOMINDA is setting up new airbag capacity of 1.2mn units per annum, to be commissioned from Q3FY25 via TG Minda JV. Net debt was INR 12.96bn as of end-Q3FY24 versus INR 10.76bn as of end-FY23, up on account of land bank purchase.

Valuations: Reiterate Buy; TP maintained at INR 822    

New capacities for switches, alloy wheels and lighting to aid strong growth trajectory. With commissioning of the upcoming alloy wheels and lighting capacity, expect incremental revenue growth. But margin may be range-bound on fixed cost from ramp-up of new capacity. Rising EV focus and kit value for EV/ICE may aid OEM growth outperformance. Expect 18% revenue CAGR in FY23-26E, outperforming 2W and PV OEM CAGR of ~8%. Expect an EPS CAGR of 23% in FY23-26E. We are positive on UNOMNDA’s strong execution capability as it benefits from four LACE mega trends. Retain Buy with SoTP-TP maintained at INR 822 (we had raised TP from INR 767 in our report LACE 2.0 dated 23 January 2024), on 36x FY26E P/E and EV business valued at INR 54.

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