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Company Report

Minda Corporation Ltd.


CMP

Rs.89.40

Target Price

Rs.120.00

BSE Code

538962

Market Cap (Rs Cr.)

1871.14

52 Week High/Low

99.80/68.50

Industry

Auto Ancillaries

Face Value

Rs.2.00

Shares O/S

20.93 Cr.

EPS(TTM)

4.36

Book Value

23.78

P/E

20.50

P/B

3.76

29th December, 2015

BUY

Minda Corporation Ltd. is a leading automotive component


company. It has a diversified product portfolio that encompasses
Safety, Security & Restraint Systems; Driver Information &
Telematics Systems and Interior Systems for auto OEMs. These
products cater to 2/3 wheelers, passenger vehicles, commercial
vehicles and after-market.

The company has registered decent results for the quarter ending
September 2015. The consolidated revenues grew by 27.16% to
Rs.616.22 crores vs. Rs.484.59 cr. in the year ago quarter while it
grew ~17% q-o-q. The growth was due to the combined effect of
new products that started during the year and of increase in the
share of business of few of the existing customers. Operating
profit too grew sharply by 29% at Rs.58.56 crores as against
Rs.45.43 crores in the preceding quarter while it climbed 24% on a
q-o-q basis. The companys continued focus on value added
products coupled with the ongoing cost optimization initiatives
helped the profits. The adjusted net profit surged at Rs.23.04
crore as against Rs.21.73 crore; registering growth of mere 6% on
a y-o-y basis while it surged by 30% as compared to like quarter
last year mainly attributed to lower interest outgo. Interest
expense decreased on account of better cash management, lower
working capital requirements and repayment of term loan.

Minda Corporation achieved a higher growth on the back of new


business and strong performance by Wiring Harness, After
Market & Die Casting operations.

Shareholding Pattern

Valuation

Research Analyst: Vineeta Mahnot


research@hemonline.com
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New product launches through technological advances and


developments, client addition, increasing penetration in new
territories, operational efficiency, capacity expansion and improving
financial metrics bodes well for the company growth going forward.
We believe the company is trading at an attractive valuation at 16.87x
and 11.49x of FY16EPS of Rs.5.30 and FY17EPS of Rs.7.78. We initiate
a BUY on the stock with a target price of Rs.120 (appreciation of
about 34%) with the medium to long term investment horizon.

Hem Research

www.hemonline.com

Business overview
Minda Corporation is a leading automotive component and
flagship company of Spark Minda, Ashok Minda Group,
which was founded in 1958 by Late Shri S. L. Minda. The
company is a diversified company with a product portfolio
encompassing from Mechanical & Electronic Security System,
Electronic Controllers for Electric Vehicles and for Auto
OEM's across the Globe. It also manufactures Die Casting
Parts for auto and consumer durable industry. The Company
is one of the largest suppliers of 2 wheeler, 3 wheeler and Off
Road vehicles Electronic & Mechanical Security System to
OEM's and exports about 20% of its products to USA, UK,
Europe & South East Asia and ASEAN countries.
Headquarter at Noida, Minda Corporation Limited is an
erstwhile Joint Venture with Huf Hlsbeck & Frst GmbH & Co. KG, Germany.
It is the only company in India to have its own patented Magnetic Shutters for 2 wheeler application. To enhance the
vehicle security it manufactures Lock Sets with conventional keys, 2 Track Keys, 4 Track Keys & Snake Biting Keys for
2 Wheeler Applications. The company designs & manufactures Immobilizers for 2 wheeled vehicle applications and
also has patent for the Immobilizer application for vehicles operating with drained or no battery condition.
Strong customer base including key OEMs: Ashok Leyland,
Bajaj, BMW, Daimler, Hero MotoCorp, Honda Motorcycle,
Mahindra & Mahindra, Maruti Suzuki, Renault Nissan, Tata
Motors, TVS Motors, Yamaha and VW Group. The Company
has 29 state of the art manufacturing facilities - India (24),
South-East Asia (2) and Europe (3) and a representative office
in Japan with a workforce of over 10,000.
The company has a separate Die Casting Division with
manufacturing facilities like GDC, LPDC, HPDC for
Aluminum & Zinc Hot Chamber Die Casting under one roof.
The casting facility is supported with state of the art
machining centers for supply of fully finished products. All other related facilities like Die design & manufacturing,
Core making, Heat Treatment (T6), Shot blasting, Powder coating, etc. are in- house. Product range includes
Compressor Housings for Turbo Chargers, Upper Brackets & Handle Holders used in premium segment bikes, Brake
Calipers, Master Cylinders, TMC, In- take manifold, etc.

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New order wins in line with product portfolio expansion


Minda Corporations continuous focus on technology,
research and development helped it to procure orders
for supply of ABS wiring harness to some of the leading
CV OEMs. Further, with the tightening in regulatory
requirement for safety equipment, there will be strong
growth in the demand for these high value added
product lines. In line to it, in Germany the company has
secured a couple of new business from BMW and Audi.
The companys European subsidiary, Minda KTSN has
a couple of sizeable orders from VW for the models
which are expected to be launched in 2016-17 or 20172018. The company is in the process of evaluating the
proposal on account of profitability, entry in new
territories like china and Mexico and new production
locations. Further, the company has also started a couple of new products during the last six months under the
aftermarket segment namely filters, control cables etc. The company also started the sensor business this year which is
witnessing a good response. The market for the various sensors for the year 2015-16 is about Rs.1,400 crores in India.
Sensors which are used in passenger vehicles, two-wheelers and many other vehicles; Minda corporation has only
about 3 to 4% of market share. The company started this business this year only and invested a good amount of money
to build a world class facility in Pune. This sensor business is continuously supported by the JV partner through with
it focuses on technology for new product development and improvement in existing product. Given that the company
already has orders and new products are under development, the company may have good growth over the next twothree years both in topline and bottomline. The major customers currently in this space are Hero Motor Corporation,
Tata Motors and Mahindra & Mahindra. The company plans to roll out these sensors to other OEMs too which will
increase their market share to 8-9% in the next three years.

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Strong growth ahead


Revenues for the first half of the current financial year stood at Rs.1,144 crores which is expected to increase by 2530%; thereby turning into about Rs.2,500 crores for the full year. With the launch and start of supply of new products
with the OEMs in the area of wiring harness; there is scope in improvement in EBIDTA margins going forward.
Further, operational efficiency owing to lowering of the costs, margins are expected to improve by at least half
percentage by the end of the year. Minda SAI (a 100% subsidiary of Minda Corporation) has acquired 51% equity of
Minda Stoneridge Instruments Ltd. in Q2FY16. FY2017 will witness a strong growth and 11% of margins on the back
of a full year impact of this acquisition combined with an introduction of a couple of good products in die-casting and
security segments. Further, the company expects good business from HeroMoto Corporation and Bajaj in die casting
segment. The sensor business is witnessing a good response and has good customers too which may increase its
market share form 3-4% to 8-9% in about three years time. Further, the new products launched under the aftermarket
segment namely filters and control cables are expected to be about Rs.35-40 crores in this financial year. On the
financial parameters, the company expects to improve its debt equity ratio as it is retiring its debt by about 27-30
crores every year. The company already has a huge built up space available in all its existing 29 plants in India;
thereby capex would not be more than Rs.40-45 crores annually. The average tax rate is expected to stay around 3033%. Riding the power of a much healthy balance sheet, new products, new clients, new geographies; the company
aims to achieve Rs.5000 crore of turnover in the coming three-four years timeframe.

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Consolidated Profit & Loss Account


Rs. Crore
Particulars
Net sales

FY13

FY14

FY15

FY16E

FY17E

2173.58

1593.91

1970.64

2463.30

3098.83

-26.67%

23.64%

25.00%

25.80%

Growth
Expenditure

2064.88

1468.16

1785.09

2224.36

2782.75

EBITDA

108.70

125.75

185.55

238.94

316.08

15.69%

47.55%

28.77%

32.28%

Growth
EBITDA margin

5.00%

7.89%

9.42%

9.70%

10.20%

Other income

36.20

30.38

22.67

19.71

21.69

Depreciation & Amortisation

77.05

47.80

60.26

70.07

76.59

EBIT

67.85

108.33

147.96

188.58

261.18

EBIT margin

3.12%

6.80%

7.51%

7.66%

8.43%

Interest

42.43

27.51

39.46

35.53

34.18

PBT

25.42

80.82

108.50

153.05

227.01

Tax

17.47

17.20

27.15

39.79

61.29

PAT

7.95

63.62

81.35

113.26

165.71

Share of Associates

0.00

0.98

4.43

0.00

0.00

(1.03)

0.00

(1.37)

2.30

2.80

8.98

64.60

87.15

110.96

162.91

619.46

34.91

27.32

46.82

Minority Interest
Adjusted PAT
Growth
Net Profit margins

0.41

4.05

4.42

4.50

5.26

Exceptional item

2.98

(14.75)

(2.38)

0.00

0.00

Reported PAT

6.00

79.35

89.53

110.96

162.91

Equity Capital

20.40

20.26

41.46

41.86

41.86

Res. & Surplus

1013.08

1015.08

1308.63

1,392.62

1,492.13

Equity Shares

2.04

2.03

20.73

20.93

20.93

Adjusted EPS*

0.43

3.12

4.20

5.30

7.78

* Adjusted for current no. of equity shares

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Balance Sheet
Rs. Crore
Particulars

FY13

FY14

FY15

FY16E

FY17E

Equity Share Capital

20.40

20.26

41.46

14.46

14.46

Preference Capital

19.20

19.20

19.20

19.20

19.20

Reserves & Surplus

306.61

349.93

405.90

504.30

650.47

Shareholders funds

346.21

389.39

466.56

537.96

684.13

Borrowings

531.87

552.33

501.85

473.71

455.71

Deferred tax liability

10.34

8.59

5.70

5.70

5.70

Minority Interest

5.12

0.00

24.15

25.60

25.76

Sources of funds

893.54

950.32

998.25

1042.97

1171.30

Gross block

902.30

987.05

1,032.26

1094.80

1178.26

Accumulated Depreciation

435.81

460.26

461.46

531.53

608.12

Net block

466.49

526.78

570.80

563.27

570.14

Capital WIP

67.68

15.02

15.32

19.36

23.82

Investments

0.00

24.52

28.91

30.65

37.70

Inventories

252.74

186.65

230.77

270.47

320.61

Sundry debtors

305.49

291.48

317.62

368.02

438.16

Cash and bank balance

57.50

54.02

44.11

44.34

53.43

Other current assets

7.30

10.50

19.65

4.43

21.37

Loans and advances

115.73

203.20

194.41

199.53

235.11

Total current assets


Current liabilities and
provisions

738.76

745.86

806.56

886.79

1068.68

379.40

361.86

423.33

457.11

529.05

Net current assets

359.36

383.99

383.22

429.68

539.63

Uses of funds

893.54

950.32

998.25

1,042.97

1,171.30

FY13

FY14

FY15

FY16E

FY17E

Return on Equity

2.75

17.45

19.48

21.39

24.50

Return on Capital employed

7.73

11.50

15.28

18.64

22.91

Debt/Equity

1.63

1.49

1.12

0.91

0.69

Asset turnover

1.71

1.21

1.39

1.64

1.82

Current Ratio

1.95

2.06

1.91

1.94

2.02

Interest coverage

1.60

3.94

3.75

5.31

7.64

Ratios
Particulars

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Consolidated Quarterly Financial Highlights


Rs. Crore
Particulars

Q2FY16

Q2FY15

Q1FY16

YoY%

QoQ%

Revenues

616.22

484.59

528.07

27.16

16.69

Expenditures

557.66

439.16

480.85

26.98

15.97

Operating Profit

58.56

45.43

47.22

28.90

24.02

Adjusted Net Profit

23.04

21.73

17.7

6.03

30.17

Exceptional item

6.02

---

2.54

----

----

Reported PAT

29.06

21.73

20.24

33.73

43.58

OPM%

9.50

9.37

8.94

13bps

56bps

NPM %

3.74

4.48

3.35

(110bps)

39bps

Adjusted EPS*

1.10

1.04

0.85

5.77

29.41

*Adjusted for current number of equity shares

Past Price movement of the stock


MINDA CORPORATION (91.2000, 91.4000, 89.1500, 89.4000, -0.9000)

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23 2 9
2015

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16

23

30
13 20 27 4 11 21
April
May

1
15
June

29 6
July

13

20

27

3
10
August

17

24

31 7
14 21 28 5
12
September
October

19 26

2
9 16
November

23 30 7
14
December

21 28

4
11
2016

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PHONE- 0091 141 405 1000

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Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information
and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care
has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer
or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an
investment advise. Reader is requested to rely on his own decision and may take independent professional advise
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Disclosure of Interest Statement

Company Name

1. Analyst Ownership of the Stock

No

2. Hem & its Group Company Ownership of the Stock

No

3. Hem & its Group Companies Director Ownership of the Stock

No

4. Broking relationship with company covered

No

Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject
securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly
related to the specific recommendations and views expressed by research analyst(s) in this report.

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