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Nirmal Bang Report
Minda Corporation’s (MDA) 4QFY23 results came in marginally below our estimates. Consolidated revenue grew by ~13%/1% YoY/QoQ to Rs10.7bn. Ex-MIL, revenue growth came in at ~13% YoY. Revenue growth was primarily driven by strong uptick in domestic demand across business verticals as new orders and new products drove the kit value. Adj. EBITDA margin stood at 10.9%, down by 70bps vs NBIE est. due to decline in the margins of Mechatronics and After-market divisions amid stagnant exports.
Gross margin improved by ~270bps QoQ to 37.6% on the back of softening RM costs. PAT growth of ~133% QoQ was mainly driven by impairment of investment in one of the associates and tax allowance arising out of earlier years’ impairment provision. MDA continues to win new orders across segments for value-added and new-age products like smart keys, sensors, digital clusters etc., which should further improve its product mix and profitability going forward. Semiconductor supply situation eased in 4QFY23.
Total EV order book stood at 20% of total order wins for FY23. MDA has been focussed on cashing in on the Premiumisation trend by investing in R&D and new product development. It has been working on products that are expected to have 3-4x content value compared to traditional products. It has developed products like Key Less Smart Lock, DC-DC Converter, Compressor Housing, Powertrain Sensors and BMS etc. The key growth drivers for MDA include new product offerings to increase the kit value, growing SOB with customers, improving profitability post several business restructuring exercises and removal of loss-making businesses.
We have a positive view on MDA as we believe that it will be a key beneficiary of the recovery in 2W and CV cycles over the next few years. We have factored in 5%/11% Revenue/EBITDA CAGR over FY23-FY25E. We further expect return ratios to improve and model ROE/ROCE of 15%/26% for FY24. We ascribe target PE multiple of ~23x on FY25E EPS to arrive at a target price (TP) of Rs302 and maintain ACCUMULATE on MDA
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