Auto parts industry will clock healthy growth for 2-3 years: Crisil
https://www.thehindubusinessline.com/news/auto-parts-industry-will-clock-healthy-growth-for-2-3-years-crisil/article24435774.ece
Minda Industries posted another good set of numbers:
Details:
https://www.bseindia.com/xml-data/corpfiling/AttachLive/3544fb69-5d44-4d11-b5f4-ed11e41c1126.pdf
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Minda group has been one of the top notch Auto ancillary company historically in India
They are well diversified with customer base across almost all Blue chip Auto companies : MSIL, BMW, Honda, Eicher, Bajaj etc
Those who are already invested or following kindly let me know if you see any blindspots.
Financial implications of various growth initiatives as per what I could decipher from FY19 Q1 conference Call. Topline I have mentioned below is for 3 years(Conservative assumption) even though most of it could be realized in first 2 years.
New Alloy wheel plant: 720 crores
Sensor Segment : 450 crores
ISYS buy out : 80 crores
TG Minda consolidation: 480 crores
In house Controllers (result of R&D): 400
Totally 2130 Crores approx
Additionally the existing products volume itself will grow in-ine with Auto industry growth (Assume 8% growth approx. in line with GDP) . Additionally the kit value per car will grow another 12%
Putting all the above together, the topline will double in 3 years.
Conservatively maintaining the current level of EBIDTA margins 12% will give a EBIDTA of approximately 1100 crores and Net profit of 800 crores
Valuations:
Currently Trading at FY 2021 10X PE
Considering trailing PE 20 to 25 in FY2021 the market cap can range between 16000 crores to 20000 crores.
Conservatively more than 1 bagger
However at one point it was trading at TTM 40x PE. If it will ever undergo rerating again due to market exuberance or based on new growth initiatives later on you can further make money for another 1 or 2 baggers based on forward multiples
About Management:
I personally liked the way they explained all the business drivers very clearly and patiently.
Best part is, they have a plan and financial guidance for all their initiatives and in the past they have achieved what they have promised. I did not hear or read any negative comments on the management.
The data provided in annual report is also exhaustive and transparent.
Only one small negative aspect I found was its family business and CEO is taking 3% of profits as commission. However overall management salary is within 10% of company profits and not bad at all. They have certainly created a lot of value for shareholders.
Cash flows have been impressive historically as they have managed to fund all the JVâs and acquisitions through internal accruals
Having said all, the thief is not a thief until caught⌠so better to be cautious.
Let me know your thoughts
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This looks like a solid business with strong growth over the last couple of years and promising prospects in the future. However, what are the views on valuation? Is it worth a look at current levels?
Thanks!
The stock looks a bit under valued if i take the following assumptions:
- 20% yoy growth in EPS for next 5 years (For the past 4 years, it has been 50% YoY or more)
- Dividend Payout ratio to be 20% (Again, it has been more than 20% for last 5-6 years)
- Rate of return (Discount rate) at 15%
- PE Ratio after 5 years = 20
I believe the above assumptions are on the conservative side but still give me current fair value of 330. So in my view, the stock seems undervalued
Would love to get more opinions as I am a novice at valuing investment opportunites
Disc: Invested and accumulating
Thanks
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Your assumptions seem fair but can you throw more color on how you calculated the 330 value?
Minda computation.xlsx (10.6 KB)
Hi, kindly let me know if you find any error with the computation
Regards
The Board of Minda Industries at its meeting held on 22 December 2018 has approved the acquisition of Magnetic Speed & Position Sensors (Cam, Crank & TISS sensor products) business from Sensata Technologies i.e. Business Transfer of CAM, Crank & TISS sensors, sharing of know-how, Technical support and Engineering support for 5 years.
At âIndia Business Leaders Awardsâ (IBLA) Ceremony conducted by CNBC TV 18
Minda Industries has been awarded with the âMost Promising Company of the Yearâ Award in âIndia Business Leaders Awardsâ (IBLA) Ceremony conducted by CNBC TV 18 in Mumbai on 17 January 2019. Nirmal Kumar Minda, Chairman & Managing Director, of the Company has received the said award on behalf of the Company.
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EY, the global professional services organisation, on Monday announced a list of 16 of the countryâs âmost exceptionalâ entrepreneurs as finalists for the â20th Entrepreneur of the Year â India 2018â awards.
One of the finalist is Nirmal K Minda, Chairman and Managing Director, Minda Industries;
The finalists were selected by an eminent eight-member independent jury panel, led by Uday Kotak, Managing Director and Chief Executive Officer, Kotak Mahindra Bank.
The winners will be announced across several categories and will be felicitated at a grand celebratory Awards Banquet to be held on 12 February in Mumbai. The national winner will represent India at the EY World Entrepreneur of the Year Award (WEOY) in Monte Carlo from 5 â 9 June 2019
Minda Industries has entered into a definitive agreement with KPIT Engineering to purchase its business related to telematics hardware products consisting of VTS [AIS 140], OBITS (On Bus Integrated Telematics Systems complying to UBS-II specifications), and telematics products for school buses. The agreement is subject to customary closing conditions and approvals. MIL will be a preferred supplier to KPIT for other telematics hardware products.
Commenting on the pact, N K Minda, chairman and MD, Minda Industries said: âWith AIS 140 notification being released by the Government this year and its implementation with effect from January 2019, we believe that this segment will offer opportunity for growth and expansion. In addition to this, KPIT is among the pioneers in the telematics space in India and this collaboration would give access to new customers and technology.â
Kishor Patil, CEO of KPIT, said: âThis collaboration is in line with our re-defined strategy to focus on software development and integration for mobility. Mindaâs proven manufacturing capability will impart scale and benefit our customers and employees.â
Minda Industries is the flagship company of the UNO Minda Group, which is a leading supplier of proprietary automotive solutions to OEMs as Tier 1. The Group is a global player in the automotive sector with overseas manufacturing facilities in Indonesia, Vietnam, Spain, Mexico, Morocco, Germany and Colombia as well as design offices in Taiwan, Japan and Spain. It has 58 manufacturing plants globally and has JVs/Technical Agreements with world renowned manufacturers from Japan, Italy, Taiwan and India.
KPIT, which specialises in embedded software, Al and digital solutions for the automotive and mobility industry, partners with customers to accelerate implementation of next generation technologies. It has technology centers in Europe, USA, Japan, China and India.
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what is the reason for a TVS group company to merge with Minda rather and any of its own group companies? Is there a arbitrage opportunity here ?
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Can anyone who attended the AGM please post the important takeaways?
âŚwhen the funds put up a piece of news in the media, suspect that they want to sell their stocksâŚ
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Minda Industries to acquire Delvis, Germany.
Minda Industries has entered into definitive agreement with Shareholders of Germany based Automotive Lamps engineering, design company & testing, Delvis Gmbh, to acquire 100% interest in the company. The enterprise value of the company along with its two subsidiaries Delvis Solution and Delvis Products is Euro 21 Mn, subject to adjustments, if any, at closing. The transaction is subject to customary closing conditions and other regulatory approvals. The transaction is expected to be concluded in next two months. The transaction will be funded by mix of debt and equity.
The acquisition is part of our strategy to augment/acquire technological capabilities in existing product lines (Automotive Lighting). Delvis is among the top players with state of the art lighting technology and works closely with German OEMs (VW / Audi/ Porche) in pre-development activities for high end platforms, which
deploy the next level of technologies. This acquisition is expected to deliver considerable synergies for growth of lamp business in India and enhance its product offerings to OEMs.
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