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A unique play on emerging automotive trends

Uno Minda (UML) has a well-diversified and largely fuel-agnostic product mix with an ability to enter new high-potential segments through partnerships or its own R&D (37 R&D centers globally). Further, UML is emerging as one of the key beneficiaries of structural growth trends in the industry, such as premiumization and EV transition, which are driving a steady rise in content per vehicle (CPV) for UML over the years. Management’s long-term aspiration to deliver 1.4x-1.5x higher growth than the underlying industry appears highly credible given its past track record of outperformance above this threshold. Management expects FY27 to be a defining growth year for the company, as seven of its 11 new projects will be operational or in a ramp-up phase. We believe UML can be viewed as a long-term structural growth story given its consistent outperformance to core industry growth with healthy return ratios and its ability to foray into new emerging businesses with high-growth potential. Considering these factors, along with solid financial strength and robust growth expectations (19%/23% CAGR in revenue/PAT over FY26-28E), UML’s premium valuations appear justified. We value UML at 45x FY28E EPS to arrive at our TP of INR1,406 per share. We initiate coverage on UML with a BUY rating and position UML as our top pick in the auto ancillary sector

Well-diversified player with consistent outperformance

* UML has an extremely well-diversified and fuel-agnostic product portfolio spanning all key automobile segments. Its FY26 mix was well balanced – Switches (25%), Lighting (22%), Castings (19%), Seating (7%), Green Mobility (7%) and Others (19%). The Others segment includes multiple high-growth product categories, including acoustics, sensors and ADAS etc. While PVs make up 48% of its mix, 2Ws form 42% and the balance is divided between 3Ws (3%), CVs (4%) and OTR (3%). Further, 10% of its business mix comes from outside India on the back of its international presence. Moreover, 7% of its mix comes from after-market business.

* Another key aspect of its product mix is that almost 95% of its product mix is fuel-agnostic. All its major segments are deeply aligned with the upcoming automotive technologies, particularly related to electrification, safety, and connectivity. Further, this versatility enables UML to support a wide range of OEMs and swiftly adapt to changing market dynamics, regulatory shifts, and evolving mobility trends, including the transition toward clean technologies

Partnership capability and R&D focus key to outperformance

* UML has established 37 R&D centers, in addition to global tech partnerships, with 292 patents granted and 577 designs registered. Its global R&D centers are aligned with global advancements and best practices.

* We believe this combination of partnerships and in?house engineering is the core engine supporting structurally higher growth than the industry while building capabilities that are difficult to replicate organically.

* Management’s long-term aspiration has been to grow at 1.4x-1.5x underlying industry growth, and appears highly credible, given its past track record of consistent outperformance above this threshold.

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