Sample  Research Report  
 Minda Industries   
Vol. No. : 14    Issue No. : 37                             Wednesday, February 24, 2016

Illuminating prospects

A well-diversified product range and leading positions in key products will help the company to grow faster than the auto industry it caters to

Related Tables
4Minda Industries: Consolidated financials
4Minda Industries: Consolidated results

Buy Minda Industries
BSE Code 532539
BSE Group B
NSE Code MINDAIND
ISIN Demat INE405E01015
Bloomberg MNDA@IN
Reuters MNDA.BO
Par Value Rs 10
52-week High/Low Rs 996 / Rs 475
Current Price Rs 749 (as on 24th February 2016)

Minda Industries (Minda), a flagship company of UNO Minda, NK Minda Group, is engaged in design and manufacturing of automotive switches, lighting systems and horns. It is the market leader in the domestic Switches and Horns segments commanding a market share of 61% and 47% respectively.

It started with operations in Automotive Switches and then diversified into several other product lines. It plans to further expand the product portfolio through JVs with several global tier I manufacturers.

It also manufactures automotive batteries, CNG/LPG kits, blow-moulds, fuel caps, renewable and energy efficient devices among others.

It has 37 manufacturing plants located across 17 locations in India.

Switch Division - is the largest manufacturer of automotive switches in India

Minda Industries is the largest manufacturer of automotive switches in India. It provides end to end solution in switches, right from product development to production and aftermarket sales. The switches produced by the company are world class, which are widely used in two wheelers, three wheelers and off-road vehicles. Sales to OEM form the largest revenue segment, followed by aftermarket and exports. The vision of the company is to continuously encourage innovation and position itself as a technology leader and preferred supplier of 2W, 3W switches, Off-Road switches and Handle Bar System across the globe. End to end solution ensures that final product is innovative, state of the art technology, reliable, and cost effective.

Presently six plants are operating across India catering to marquee OEM customers like Bajaj, Yamaha, Suzuki, Hero Motorcorp, HMSI, TVS, New Holland, Eicher, Mahindra, TAFE, Royal Enfield etc.

The switch division holds a lion’s share of the company’s turnover, contributing to 36% of the aggregate consolidated sales.

The company, being a leader in this product segment is increasing its product portfolio and enhancing features.

The company’s revenue market share in respective OEM switches business stands at: Bajaj (75%), TVS (95%) and HMSI (33%).

Export constitutes to 7.1% of the sales of this business division. It exports switches to the US, France, Italy, Austria etc.

Minda has got access to 64 patents and 87 design registrations. It has developed in-house capability on product development for switches business, enabling it to get associated with OEMs at the design stage of a product.

Ramp-up with new customers, and increasing value add to drive growth in this division

Outlook Switch division - will benefit from ramp-up with new customers

Volumes for the business is expected to rise significantly as Minda recently added HMCL as its client for Switches business, while volumes to HMSI will increase with supplies to latter’s Gujarat plant.

Minda is focusing to move up the value chain by increasing its product offerings like handle bar assembly. It aims to be a global technology leader in two/three-wheeler, off-road switches and handle bar systems.

It expects capacity utilization to improve going forward with a revival in domestic economy and auto sector demand.

Minda’s key focus in Switches segment is to increase capacity utilization, share of business among OEMs and presence in exports and replacement markets.

Lighting Division

Lighting Division of the company caters to the four wheelers, two wheelers, three wheelers, and off road vehicles with focus on OEMs. Products are offered across all three ranges – head lamp, tail lamp and small lamp (interior light, side light etc).

A major part of the sales is derived from offering lighting products to distinguished OEM clients who includes Maruti Suzuki, Tata Motors, M&M, GMIL and Volkswagen among others. OEM sales constitute 85%, while exports offer 7% and replacement market gives a modest 8%.

Lighting division contributes around 13% to consolidated revenue.

The company is the third-largest player in the Lighting segment (after Lumax and FIEM) commanding a market share of 17-18%.

Outlook Lighting Division – Performance to grow in line with passenger vehicle sales

Maruti contributes close to 32% of Minda’s OEM revenue in the Lighting business. It enjoys 20% share of Maruti’s overall lighting requirement in terms of value.

Minda recently got a order for four new lighting products from Maruti.

It expects the next growth phase to come from this business, which would improve the market share from 17% to 20%.

It also expects margin expansion in this business from current PBDT margin of 6% to 8% by FY16, driven by better product mix and higher capacity utilization.

Horns division: largest player in horn

MNDA is the largest manufacturer of horns in India with 47% market share. Horn segment contributes 8% to consolidated revenue.

It supplies horns to all segments -- two-wheelers, three-wheelers, four-wheelers, off-road and CVs.

Its biggest customer in this business is Bajaj, with 26% contribution to its horn business OEM revenue. The company recently started supplying horns to Hyundai India.

Outlook Horn divisions - Clarton acquisition gives access to technology, new customers

To be a global player in automotive horns, Minda acquired the Spain-based Clarton Horn S.A.U for Euro 7m in FY14.

Clarton, a global player in automotive horns, gives access to technology to manufacture electronic horns, which is a high value product, thus making Minda the sole player to manufacture it in India.

With Clarton, Minda gets access to do business with BMW, Mercedes etc in the domestic market.

Minda’s key focus is to leverage both the low cost Indian manufacturing base for Clarton’s European OEM base and introduce electronic horns in India.

Other businesses also provides value

Mindarika – a 27% associate company, a market leader in 4W switches is the joint venture between Minda and Tokai Rika. Some of the key customers are Maruti, Tata Motors, Honda and Toyota. Mindarika enjoys 60% market share of 4W switches business.

Fuel Cap business is a promising opportunity for Minda as it supplies only to Maruti (for Maruti it used to be a completely imported product from Japan). Most of OEMs are importing directly from China and Thailand at a cheaper price with one way air pressure, however Maruti is using two way air pressure fuel cap so costs is high. Minda started supplying to Maruti from 4QFY14. Currently, it supplies to only two of Maruti’s products, which is expected to increase with new model launches and focus on localization.

The company is trying to revive its Battery business by entering into a JV with Panasonic Corporation of Japan. A JV of 40:60 has been set up with Rs 16 crore as investment – Minda’s contribution being the Rs 6.40 crore battery plant it has at Pantnagar and Panasonic bringing in Rs 9.60 crore of equity. Though the facility has an installed capacity of 4.2m units p.a., it is 30% utilized, which gives huge opportunity to scale up. Presently, Minda intends to concentrate only on the aftermarket sales business of 2Ws, 4Ws and UPS battery.

Minda has 70:30 JV with Kosei Group (Japan) for development of alloy wheels. Kosei group is a leading Japanese Alloy Wheel manufacturer. The proposed plant of the joint venture company will be located at Bawal (Haryana) for manufacturing and supply of alloy wheels for passenger vehicles. The commercial production of the plant is expected soon, with a monthly capacity of 60,000 units.

Consolidated financial performance – strong growth

For the quarter ended December 2015, consolidated sales grew 13% to Rs 625.69 crore. OPM jumped 210 bps to 9.4% (from 7.2%) which took OP up 45% to Rs 58.93 crore. Other income jumped 118% to Rs 7.58 crore and Interest cost grew 13% to Rs 7.06 crore.

As depreciation went up 5% to Rs 21.66 crore, PBT jumped 118% to Rs 37.79 crore. EO gain was Rs 2.63 crore against nil. Thus PBT after EO grew 133% to Rs 40.42 crore. After providing for tax (up 96% to Rs 8.99 crore), PAT soared 147% to Rs 31.43 crore.

After providing for minority interest and share of profit/loss of associate companies, net profit grew 122% to Rs 28.85 crore.

For the nine months ended December 2015, sales grew 16% to Rs 1810.03 crore. OPM improved 140 bps to 8.6% (from 7.3%) which took OP up 38% to Rs 156.30 crore. After providing for minority interest and share of profit/loss of associate companies, net profit grew 28% to Rs 68.58 crore.

Valuation

In FY 2016, we expect the company to register sales and net profit of Rs 2570.22 crore and Rs 90.55 crore respectively. EPS works out to Rs 55.8. This EPS is likely to grow to Rs 67.8 in FY 2017. The share price trades at Rs 749. P/E on FY 2017 projected EPS works out to 11.0.

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Minda Industries: Consolidated financials
 
  1303 (12) 1312 (12) 1503 (12) 1603 (12P) 1703 (12P)
Net sales 1340.40 1706.13 2226.62 2570.72 2956.33
OPM (%) 7.0 4.6 6.9 8.3 8.6
OP 93.46 77.82 154.35 214.12 254.24
Other inc. 10.98 16.87 22.92 27.89 29.29
PBIDT 104.44 94.69 177.26 242.01 283.53
Interest 19.06 24.18 25.01 26.81 28.95
PBDT 85.37 70.51 152.25 215.20 254.58
Dep. 46.27 59.08 83.49 94.41 105.74
PBT before EO 39.10 11.43 68.76 120.79 148.84
EO 0.20 1.50 15.96 2.63 0.00
PBT 39.30 12.93 84.72 123.42 148.84
Tax 10.99 7.59 19.38 30.68 38.70
PAT 28.31 5.34 65.34 92.74 110.14
MI 0.09 -1.84 2.63 -2.19 -2.60
Net profit 28.22 7.18 67.97 90.55 107.54
EPS (Rs)* 17.9 4.9 35.1 55.8 67.8
*Annualised on current equity of Rs 15.8654 crore; Face value of Rs 10 each
(P): Projections
Figures in crore,
Source: Capitaline Databases

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Minda Industries: Consolidated results
 
  1512 (3) 1412 (3) Var. (%) 1512 (9) 1412 (9) Var. (%) 1503 (12) 1312 (12) Var. (%)
Net sales 625.69 555.34 13 1810.02 1559.33 16 2226.62 1706.13 31
OPM (%) 9.4 7.3   8.6 7.3   6.9 4.6  
OP 58.93 40.68 45 156.30 113.33 38 154.35 77.82 98
Other inc. 7.58 3.47 118 17.02 12.05 41 22.92 16.87 36
PBIDT 66.51 44.16 51 173.32 125.38 38 177.26 94.69 87
Interest 7.06 6.25 13 20.23 19.13 6 25.01 24.18 3
PBDT 59.45 37.91 57 153.10 106.25 44 152.25 70.51 116
Dep. 21.66 20.58 5 64.42 57.41 12 83.49 59.08 41
PBT before EO 37.79 17.32 118 88.68 48.83 82 68.76 11.43 502
EO 2.63 0.00 100 2.63 15.76 -83 15.96 1.50 966
PBT 40.42 17.32 133 91.31 64.60 41 84.72 12.93 555
Tax 8.99 4.59 96 21.04 13.59 55 19.38 7.59 155
PAT 31.43 12.73 147 70.26 51.01 38 65.34 5.34 1125
MI -2.58 0.27 -1061 -1.69 2.70 -163 2.63 -1.84 -243
Net profit 28.85 13.00 122 68.58 53.71 28 67.97 7.18 847
EPS (Rs)* # #   # #   35.1 4.9  
*Annualised on current equity of Rs 15.8654 crore; Face value of Rs 10 each
Figures in crore,
# EPS cannot be annaulised due to seasonality in business
Source: Capitaline Databases

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