Dec 18, 2015 Industrials - Electrical Equipment ... · PDF fileMinda Corporation Ltd India ... services was established ... FY17E on account of full year impact driven by new business

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Dec 18, 2015Minda Corporation LtdIndustrials - Electrical Equipment - Electrical Components Dec 18, 2015

Minda Corporation LtdIndia Research - Stock Broking BUYBloomberg Code: MDA IN

Recommendation (Rs.)

CMP 92Target Price 109Upside (%) 18

Stock InformationMkt Cap (Rs.mn/US$ mn) 19152 / 28952-wk High/Low (Rs.) 100 / 653M Avg. daily volume (mn) 0.2Beta (x) -Sensex/Nifty 25804 / 7844O/S Shares(mn) 209.3Face Value (Rs.) 2.0

Shareholding Pattern (%) Promoters 63.2FIIs 1.4DIIs 18.0Others 17.5

Stock Performance (%) 1M 3M 6M 12M

Absolute 13 24 4 -Relative to Sensex 13 25 9 -Source: Bloomberg

Relative Performance*

Source: Bloomberg; *Index 100

Analyst ContactJagannadham Thunuguntla040 - 3321 [email protected]

New Ventures Across Varied Automobile Segments to Bring About Trajectory GrowthMinda Corporation Ltd, along with its subsidiaries, is present across all segments of the automobile industry, which mainly manufactures lock systems, wiring harness, die-casting and interior plastic products.

Around 45% of their revenue is derived from passenger segment where Maruti Suzuki India Ltd constitutes their major client. In addition to this, TVS, Bajaj, Ashok Leyland, Mahindra & Mahindra, Hero, Honda, Nissan etc form their clientele. They have 6 subsidiaries that cater to all these clients in different segments.Therefore, overall revenue is expected to grow at a CAGR of 25% between FY15-17E majorly driven by new subsidiary consolidation arriving from Minda Stoneridge Ltd and new product launches. EBITDA margins are likely to expand to 9.9% in FY17E from the current 9.4% in FY15 on the back of operating cost restructuring such as localization of goods, and also waiving away non-profitable businesses. The top line growth for standalone is nominal due to considerable exposure in the two-wheeler market, which is currently trending flat. However, the cushion for overall revenue is expected to continue on the grounds of optimism in the Passenger Vehicle, Medium Commercial Vehicle and the after-market segments. Moreover, increasing turnover from Furukawa, Stoneridge and Automotive solutions is likely to grab other subsidiaries’ share in the consolidated revenue by FY17E. PAT margin (including Minority interest) is likely to expand to 4.7% in FY16E and to 5.1% in FY17E from 4.5% in FY15 driven by decreasing finance costs and improving operating efficiency.RoE is expected to improve to 22.1% for FY16E and to 24.1% for FY17E from 20.9% in FY15 driven by robust profit growth. RoCE is also expected to trend upwards to 17.5% for FY16E and 22.0% in FY17E from the current 14.0% in FY15 lead by notable debt reduction.

Valuation and Outlook At CMP of Rs. 92, Minda Corporation Ltd is currently trading at 12.2x FY17E EPS. We value the company at P/E 14.5x for FY17E EPS for a target price of Rs.109 based on the company’s future prospects. We, therefore, initiate coverage on Minda Corporation Ltd with a “BUY” rating for a target price of Rs. 109 representing an upside potential of 18% in a 9-12 month period.

For private circulation only. For important information about Karvy’s rating system and other disclosures refer to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>, Thomson Publishers & Reuters

Exhibit 1: Valuation Summary

YE Mar (Rs. Mn) FY13 FY14 FY15 FY16E FY17E

Net Sales 21736 15939 19706 24365 30625EBITDA 1087 1257 1855 2363 3032EBITDA Margin (%) 5.0 7.9 9.4 9.7 9.9Adj. Net Profit 60 793 895 1153 1576EPS (Rs.) 0.3 3.8 4.3 5.5 7.5RoE (%) 1.7 21.6 20.9 22.1 24.1PE (x) - 24.1 21.4 16.6 12.2Source: Company, Karvy Research

70

80

90

100

110

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec

-15

Minda Corporation Sensex

http://www.karvy.com/


2

Dec 18, 2015Minda Corporation Ltd

Company BackgroundHeadquartered at Noida, India, Minda Corporation Ltd was incorporated in the year 1958 by Late Sh. S.L. Minda in Delhi, officially known as SPARK MINDA is currently headed by Ashok Minda (Chairman & Group CEO). They are a diversified auto-ancillary company with a product portfolio encompassing from Safety, security & restraint systems like electronic and mechanical locks, Driver information and Telematic systems like Wiring harness and Interior systems which include plastic interiors, which they supply to the OEMs across all domains and also cater to the after-market segment. There are six subsidiaries which have both domestic and international presence in places like Europe, Vietnam, Indonesia and Singapore.

They have ~30 manufacturing facilities out of which 3 are situated in Europe, one in Vietnam, one in Indonesia and the rest are spread in India in such a way that they are logistically positioned to service their clients. Their end-market focus is on 2/3 wheelers, passenger vehicles and commercial vehicles.

Exhibit 2: Shareholding Pattern (%)

Source: BSE, Karvy Research

Exhibit 3: Revenue Segmentation

Source: Company, Karvy Research

Balance sheet (Rs. Mn)

FY15 FY16E FY17E

Total Assets 14216 16346 19156Net Fixed assets 5861 5851 5829Current assets 7864 9977 12436Other assets 491 517 891Total Liabilities 14216 16346 19156Networth (Inc MI) 4907 6107 7788Current Liabilities 4589 5792 7326Long term borrowings 4451 4041 3605Other liabilities 269 406 437

Balance Sheet Ratios

RoE (%) 20.9 22.1 24.1RoCE (%) 14.0 17.5 22.0Net Debt/Equity 0.9 0.6 0.4Equity/Total Assets 0.3 0.4 0.4P/BV (x) 4.1 3.3 2.6Source: Company, Karvy Research

Cash Flow (Rs. Mn)

FY15 FY16E FY17E

PBT 1109 1543 2205 Depreciation 603 712 759 Tax (241) (381) (530)Changes in WC 1394 (436) (1024)Others 177 254 215 CF from Operations 3042 1692 1626 Capex (809) (711) (737)Investment 24 22 (311)Others 273 25 42 CF from Investing (512) (663) (1006)Inc/Dec in Borrowing (1946) (410) (436)Others (338) (323) (288)Dividends (inc tax) (99) (99) (99)CF from Financing (2383) (833) (824)Change in Cash 147 195 (204)


Company Financial Snapshot (Y/E Mar)

Profit & Loss (Rs. Mn)

FY15 FY16E FY17E

Net sales 19706 24365 30625Optg. Exp 17851 22002 27593EBITDA 1855 2363 3032Depreciation 603 712 759Interest 395 323 288Other Income 227 214 221Exceptional Items 24 0 0PBT 1109 1543 2205Tax 271 381 530Adj. PAT (incl Minority Int) 895 1153 1576Profit & Loss Ratios

EBITDA margin (%) 9.4 9.7 9.9Net margin (%) 4.5 4.7 5.1P/E (x) 21.4 16.6 12.2EV/EBITDA (x) 12.4 9.7 7.6Source: Company, Karvy Research

Safety systems40.0%

Driver information

43.0%

Interior systems17.0%

Promoters63.2%

FIIs1.4%

DIIs18.0%

Others17.5%


3


Minda Corporation

Above illustration represents the corporate structure of Minda Corporation Ltd (MCL) which has 6 subsidiaries and 5 step-down subsidiaries and an associate company. All the companies are in auto-ancillary business, while Minda Management services was established in April 2007, to support its group companies in undertaking various activities such as policy decisions, strategy development, financial support and competence building.

Exhibit 4: Company Segmentation

Category Company Relation% Stake

ownedPlants Segment

Safety, Security & Restraint systems

Minda Corporation Ltd, India Parent company - 6 2/3 wheelers, CV, PVMinda VAST access systems Pvt Ltd, India Associate 50 2 PVPT Minda Automotive, Indonesia Step-down subsidiary 100 1 2 wheelersMinda Vietnam Automotive Co. Step-down subsidiary 100 1 2 wheelers

Driver information & Telematic system

Minda Furukawa Electric Pvt Ltd, India Subsidiary 51 5 PV

Minda Stoneridge Instruments Ltd, India Subsidiary 51 22/3 wheelers, CV, PV,

TractorsMinda SAI Ltd, India Subsidiary 100 9 2/3 wheelers, CV

Interior Systems

Minda KTSN Plastic Soln GmbH& Co. KG, Germany

Subsidiary 100 1 PV, CV

Minda KTSN Plastic & Tooling Solutions Sp Zo.o, Poland

Step-down subsidiary 100 1 PV, CV

Minda KTSN Plastic Solutions Ltd, Czech republic

Step-down subsidiary 100 1 PV, CV

After marketMinda automotive solutions, India Subsidiary 100 1

2/3 wheelers, CV, PV, Tractors

PT Minda Automotive Trading, Indonesia Step-down subsidiary 100 0 -

Source: Company, Karvy Research, CV: Commercial Vehicle, PV: Passenger Vehicle

Minda SAI

Minda VietnamPT Minda

Automotive, Indonesia

Minda KTSN Plastic Czech

Minda AutomotiveMinda Management

ServicesMinda Furukawa

Electric (51%)Minda KTSN Plastic

Germany

Minda VAST Access System (50%)

Minda KTSN Plastic Poland

Minda Stoneridge (51%)

Almighty International PTE, Signapore

DomesticInternational



4


Minda Corporation Ltd (Standalone)Minda Corporation Ltd is the parent company that caters to Safety security and restraint systems consisting of products like Electronic and Mechanical locks and die-casting products. They predominantly supply to the two-wheeler manufacturers such as Bajaj Auto, TVS and Yamaha whose YTD domestic sales volume growth (YoY) is 2.0%, 3.5% and 8.7% respectively. The revenue contribution from standalone was ~30% to the consolidated revenue as on FY15.

Therefore, going forward, we expect standalone revenues to surge at a CAGR of 6% between FY15-17E. Standalone sales for H1FY16 rose 5% as compared to previous H1FY15, and EBITDA margins notably expanded to 14.2% in Q2FY16 from 11.1% in Q1FY16 as an effect of waiving-off their surface finishing & injection molding plastic coating business. PAT margins are expected to improve to 6.8% in FY17E from the prevailing 5.4% in FY15 driven by reduced operating expenses and declining interest cost. Their current leverage position has reduced to 0.04x as on Q2FY16 from 0.13x in FY15.

Minda Stoneridge LtdMinda Stoneridge Ltd, which was earlier a joint venture between Minda and Stoneridge Inc. USA, has been merged with the parent company w.e.f. Oct 1, 2015 as the company has acquired 51% equity stake as compared to the previous 49%.

Minda Stoneridge Ltd works on two main portfolios: Instrumentation, and Sensors; which commenced this fiscal. In the instrumentation category, they supply to Original Equipment Manufacturers (OEMs) such as TATA motors, Mahindra & Mahindra, Ashok Leyland, Bajaj, Yamaha, Suzuki in India and also export to General Motors which generated ~Rs. 2850 Mn in FY15. The sensor business is expected to make Rs. 350-400 Mn this fiscal, as the management has indicated ~3% market share in sensor market which is roughly sized about Rs.14000 Mn. We expect sizable traction in this portfolio considering their clientele exposure such as Hero MotoCorp, TATA motors, and Mahindra & Mahindra. Therefore, we expect the turnover from Minda Stoneridge to grow at a CAGR of 11% during FY15-17E. With 51% stake acquisition, the revenues are expected to be consolidated from (Oct 2015-Mar 2016) for FY16E. The contribution to the overall revenue is likely to be 6% in FY16E and increase to 11% in FY17E on account of full year impact driven by new business opportunities with HERO MotoCorp scooters and introduction of new products in the die-casting segment. Fortunately, their exposure to most segments in the industry coupled with strong clientele relationships is likely to provide the required traction to hit the target and also diversify risk of any downfall in a particular segment.

Exhibit 5: Geographical Revenue Contribution


Exhibit 7: Quarterly sales volume growth trend for some of Minda’s major clients

Source: Society of Indian Automobile Manufacturers (SIAM), Karvy Research

Exhibit 6: Segment Contribution


India80.0%

Europe16.0%

South east asia4.0%

Passenger vehicles45.0%

2/3 wheelers31.0%

Commercial vehicles14.0%

After-market10.0%

-40%

-20%

0%

20%

40%

60%

80%

100%

Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16Hero MotoCorp Yamaha Bajaj Auto (Motor Cycle) Ashok leyland (MHCV)


5


Further, MSL has 100% step-down subsidiaries; PT Minda Automotive, Indonesia and Minda Vietnam Automotive Co, which cater to two wheeler markets in Indonesia and Vietnam. The turnover for PT Minda and Minda Vietnam in FY15 were ~Rs. 1197 Mn and ~Rs. 255 Mn contributing ~6% and 1% to the overall revenue respectively.

However, with current market conditions facing subdued demand in Indonesia and Vietnam, the revenues are expected to decline in FY16E by 3% and slightly improve by 2% in FY17E.

Minda KTSN Plastic SolutionsMINDA KTSN is a 100% European based subsidiary having presence in Germany, Poland and Czech Republic, specialized in plastic interior systems. They predominantly cater to the luxury passenger vehicle manufacturers like Audi, BMW and Daimler. This vertical generated around ~Rs.3800 Mn during FY15 constituting about 20% of the overall revenue. However, on account of European market stagnation, we have assumed revenues to grow marginally at a CAGR of 2% between FY15-17E.

Minda Furukawa Electric Pvt Ltd

Exhibit 8: YTD (Apr-Nov) domestic sales volume trend


Minda Furukawa Electric Pvt Ltd (MFE) is a joint venture between Ashok Minda group, India and Furukawa of Japan. During FY15, the company acquired additional 2% equity stake in the joint venture entity resulting in 51:49 partnership, thus making MFE a subsidiary of Minda group.

MFE is dedicated for manufacturing wiring harness and steering roll connectors for passenger vehicles predominantly for Japanese OEMs such as Maruti; their main clients, Nissan & Honda. In FY15, MFE posted revenue of ~Rs. 2190 Mn and is estimated to cross Rs. 5000 Mn by FY17E registering a CAGR growth of 53% between FY15-17E.

They have ~14% Share of Business (SoB) in Maruti where they supply to models like Celerio, S-cross, Dzire, Swift & Alto. For Nissan, their SoB is ~22% catering to models like Sunny, Micra & KWID and they also supply to Honda.

The YTD (Apr-Nov) sales volume growth (YoY) for Maruti, Nissan, Honda is 13%, -40% and 31% respectively. Although Nissan has posted de-growth on YTD terms, they have registered a notable 63% growth QoQ during Q2FY16. Therefore, subsequent growth in passenger vehicles, affluent client base and expected traction in steering roll connectors are likely to be significant drivers of growth in this segment.

Minda Automotive Solutions LtdMinda automotive solutions Ltd is a 100% subsidiary of the group that primarily caters to the after-market segment. Products manufactured at Minda are distributed through their dealerships across India. In addition to their in-house products, the management has indicated that they have also ventured into outsourcing products like Filters, control cables, brake shoes, clutch plates etc which are expected to ramp up significantly by 25% in FY17E where the share of sale from outsourcing is likely to expand leading operating margins to expand by 150 bps to 4% in FY17E from the prevailing 2.5% in FY15.

6264

92

1978

7

9536

6

7094

10

1190

9

1249

50

0

200000

400000

600000

800000

Maruti Suzuki India Ltd

Nissan Motor India Pvt Ltd

Honda Cars India Ltd

YTD (Apr-Nov 14) YTD (Apr-Nov 15)

31%

-40% 31%

Minda SAI LtdMINDA SAI Ltd (MSL), a 100% subsidiary of Minda Corp, deals with Driver Information and Telematic Systems and the main product is the wiring harness which accounts for ~22-23% of the consolidated revenue as on FY15. They largely cater to the two-wheeler and commercial vehicle market players such as Ashok Leyland, Mahindra & Mahindra, HMSI, HERO MotoCorp and TVS. Owing to subdued two wheeler growth and notable improvement in the medium commercial vehicle segment, we expect revenues of MSL to surge at a CAGR 4% during FY15-17E, thus, assuming a blended effect of the subdued two-wheeler and improving medium commercial vehicle segment. Therefore, new product introductions, new orders in the die-casting segment coupled with slight price corrections are expected to drive top-line growth. Also, operating costs are expected to reduce on account of localization of components, thus EBITDA margins are expected to improve by 50bps in FY16E to 8.2% from the current levels of 7.7% in FY15.


6


Finally, the consolidated revenue is expected to grow at a CAGR of 25% significantly driven by new consolidation of revenue arriving from Minda Stoneridge. EBITDA margins are likely to expand on the back of operating cost restructuring such as localization of goods, and also waiving away non-profitable businesses such as surface painting leading margins to expand to 9.9% in FY17E form the current 9.4% in FY15. The top line growth for standalone is nominal due to high exposure on the two-wheeler market, which is trending flat. However, the cushion is expected to continue on the grounds of optimism in the PV, MCV and the after-market segments. Moreover, increasing turnover from Furukawa, Stoneridge and Automotive solutions is likely to grab other subsidiaries’ share in the consolidated revenue (Exhibit 9). PAT margin (including Minority interest) is likely to expand to 4.7% in FY16E and to 5.1% in FY17E driven by decreasing finance costs and improving operating margins.

RoE is expected to improve to 22.1% for FY16E and to 24.1% for FY17E from 20.9% in FY15 driven by robust profit growth. RoCE is also expected to trend upwards to 17.5% for FY16E and 22.0% in FY17E from the current 14.0% in FY15 lead by sizable debt and cost reduction.

Consolidated net debt/equity ratio is expected to streamline to 0.4x in FY17E from the prevailing 0.9x in FY15. .

Working capital cycle has improved to 35 days in FY15 from 58 days in FY14 for which the management has indicated that they have quite a good deal with their clients and especially Minda Furukawa operates on a negative working capital cycle.

We have estimated some additon of fixed assets for FY16E as the company is expected to assume its subsidary assets hence the jump in the depreciation. Likewise, for FY17E, we are expecting capex on the basis of new product additions. Nevertheless, Asset turnover ratio is likely to improve to 4.7x by FY17E from 3.4x in FY15 driven by aggressive top-line growth.

Exhibit 9: Subsidiary contribution estimation


32.0%22.0% 19.7%

5.0%1.3%

9.0%1.8%

9.0%

28.0%

22.0%16.1%

4.8%

1.1%9.6%

2.4%9.6%

6.4%

23.8%

18.9%

13.1%

2.2%

0.9% 16.9% 2.9%10.0%

11.4%

0%

30%

60%

90%

Minda corporation

(standalone)

Minda SAI Minda KTSN PT Minda Automotive

Asean

Minda Vietnam Minda Furukawa

Minda management

services

Minda Automotive

Solution

Minda Stone Ridge

FY15 FY16E FY17E


7


Exhibit 10: Business Assumptions

Y/E Mar (Rs. Mn) FY14 FY15 FY16E FY17E Comments

Standalone

Revenue 6168 6491 6815 7292Nominal growth on account of subdued two-wheeler market.

Revenue Growth (%) 3.1 5.2 5.0 7.0EBITDA 594 694 791 839

EBITDA Margins (%) 9.6 10.7 11.6 11.5Expansion of EBITDA margins on account of cost restructuring and waiving non-profitable business.

PAT (normalized) 195 349 466 499Consolidated

Revenue 15939 19706 24365 30625

Significant growth driven by subsidiary performance in passenger & commercial vehicle space. New product launches also to act as a catalyst for the same.

Revenue Growth (%) (26.7) 23.6 23.6 25.7EBITDA 1257 1855 2363 3032

EBITDA Margins (%) 7.9 9.4 9.7 9.9Alternate sourcing of material and localization to reduce procurement costs to contribute to EBITDA margin expansion.

Adjusted PAT 793 895 1153 1576PAT to grow at CAGR of 41% due to declining finance costs.

Fully Diluted EPS (Rs.) 3.8 4.3 5.5 7.5

Fully Diluted EPS Growth (%) 1223.6 12.8 28.8 36.7

During FY13, the company incurred more than usual operating expenses on account of its European acquisitions; Schenk Plastic solutions and Aksys, which incurred losses and was eventually sold off in FY14. Hence, the abnormal growth in EPS for FY14.

Net CFO (177) 3042 1889 1833 Capex (696) (809) (711) (737)Net Debt 4346 4010 3215 2801 Free Cash Flow (872) 2233 1178 1096 Source: Company, Karvy Research

Exhibit 11: Karvy vs Consensus

Karvy Consensus Divergence (%)

Revenues (Rs. Mn)

FY16E 24635 25790 (4.5)

FY17E 30625 32821 (6.7)

EBITDA (Rs. Mn)

FY16E 2363 2393 (1.3)

FY17E 3032 3137 (3.3)

EPS (Rs.)

FY16E 5.5 4.4 25.0

FY17E 7.5 6.2 21.0Source: Bloomberg, Karvy Research


8


Exhibit 12: Revenue Trend


Exhibit 14: Operating Profit Margin


Exhibit 13: EBITDA Margin


Exhibit 15: PAT Margin

Source: Company, Karvy Research, * Including Minority Interest

Revenue is expected to surge at a CAGR of 25% between FY15-17E driven by 100% consolidation of subsidiaries: Stoneridge and Furukawa. Fundamental growth drivers to be PV, MCV and after-market segments. However, companies exposed mostly to two-wheeler market like Minda Corp (standalone), Minda Vietnam and Indonesia are likely to face subdued growth owing to constraint market conditions.

Operating profit margins are expected to expand by 40bps to 6.8% in FY16E and for FY17E it is expected to reach 7.4% driven by aggressive top line growth.

EBITDA margins are expected to expand to 9.9% in FY17E from the present 9.4% in FY15 on account of reduced operating expenses reflected by discarding non-profitable businesses and also due to alternate sourcing of material and localization of certain raw materials. However, copper (main raw material for wiring harness ) commodity price decline has not really contributed to their driver & telematic subsidiaries for FY16E due to additional engineering charges incurred for new product launches in this segment. Going forward, we have assumed nominal reduction in this regard.

PAT margins are expected to improve slightly by 20bps in FY16E to 4.7% from 4.5% in FY15. The nominal expansion is due to higher depreciation and increased minority interest which is likely due to the newly added subsidiary; Minda Stoneridge Ltd. However, declining finance costs have provided the necessary cushion for the margins to expand.

1593

9

1970

6 2436

5 3062

5

-26.7%

23.6% 23.6% 25.7%

-30%

-20%

-10%

0%

10%

20%

30%

0

10300

20600

30900

FY14 FY15 FY16E FY17E

Revenue (Rs. Mn) Growth (%)

1257

1855

2363

3032

7.9%9.4% 9.7% 9.9%

0%

4%

8%

12%

0

1020

2040

3060


EBITDA (Rs. Mn) Margin (%)

779 12

53 1651 22

73

4.9%

6.4% 6.8% 7.4%

0%

2%

4%

6%

8%

0

500

1000

1500

2000

2500


EBIT (Rs. Mn) Margin (%)

793

895

1153

1576

5.0%

4.5%4.7%

5.1%

3%

4%

4%

5%

5%

6%

0

600

1200

1800


PAT (Rs. Mn)* Margin (%)


9


Exhibit : Company Snapshot (Ratings)

Low High

1 2 3 4 5

Quality of Earnings 3 Domestic Sales 3 Exports 3 Net Debt/Equity 3 Working Capital Requirement 3 Quality of Management 3 Depth of Management 3 Promoter 3 Corporate Governance 3 Source: Company, Karvy Research

Exhibit 16: RoE (%)


Exhibit 17: RoCE (%)


Exhibit 18: EPS (Rs.)


Exhibit 19: Asset turn-over ratio (x)


RoE is expected to increase to 22.1% in FY16E and 24.1% in FY17E from current levels of 20.9% driven by sizable top-line growth coupled with operating margin expansion leading PAT to improve.

RoCE is expected to improve to 17.5% in FY16E and to 22.0% in FY17E from the prevailing 14.0% due to reduction in both long as well as short term borrowing.

21.6

%

20.9

% 22.1

%

24.1

%

19%

20%

21%

22%

23%

24%

25%


9.2% 14

.0% 17

.5% 22

.0%

0%

5%

10%

15%

20%

25%


3.8 4.3

5.5

7.5

0

2

4

6

8


2.9 3.

4

4.0

4.7

0

1

2

3

4

5



10


Valuation & OutlookConsidering congenial growth opportunities driven by new product ventures, we have estimated revenue as SoTP (Sum-of-The-Parts) of all subsidiaries. We maintain positive view on the company’s future prospects. At CMP of Rs. 92, Minda Corporation Ltd is currently trading at 12.2x FY17E EPS. We value the company at P/E 14.5x for FY17E EPS for a target price of Rs.109 based on the company’s future prospects. We, therefore, initiate coverage on Minda Corporation Ltd with a “BUY” rating for a target price of Rs. 109 representing an upside potential of 18% in a 9-12 month period.

Exhibit 20: PE Band

Source: Bloomberg, Karvy Research

Exhibit 21: EV/EBITDA

Source: Bloomberg, Karvy Research

Exhibit 22(a): Comparative Valuation Summary

CMP (Rs.)Mcap

(Rs. Mn)

EV/EBITDA (x) P/E (x) EPS (Rs.)

FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E

Minda Corporation Ltd 92 19152 12.4 9.7 7.6 21.4 16.6 12.2 4.3 5.5 7.5Tube Investments of India Ltd 386 72267 26.1 25.0 23.1 83.9 77.2 67.7 4.6 5.0 5.7Source: Bloomberg, Karvy Research

Exhibit 22(b): Comparative Operational Metrics SummaryCAGR % (FY15-17E) RoE (%) Price Perf (%) Net Sales (Rs. Mn)

Sales EBITDA EPS FY15 FY16E FY17E 1m 3m 6m FY15 FY16E FY17E

Minda Corporation Ltd 24.7 27.8 32.7 20.9 22.1 24.1 13.0 23.7 4.5 19706 24365 30625 Tube Investments of India Ltd 3.2 8.3 11.3 6.8 6.9 7.5 (1.0) 1.0 17.0 38278 38442 40786Source: Bloomberg, Karvy Research

5.0

7.0

9.0

11.0

Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

1 Yr forward 2 Yr forward

8.0

12.0

16.0

20.0

24.0

Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

P/E 1 Yr forward 2 Yr forward


11


Financials

Exhibit 23: Income StatementYE Mar (Rs. Mn) FY13 FY14 FY15 FY16E FY17E

Revenues 21736 15939 19706 24365 30625Growth (%) 56.9 (26.7) 23.6 23.6 25.7Operating Expenses 20649 14682 17851 22002 27593EBITDA 1087 1257 1855 2363 3032Growth (%) (19.4) 15.7 47.6 27.4 28.3Depreciation & Amortization 771 478 603 712 759EBIT 316 779 1253 1651 2273Other Income 362 304 227 214 221Interest Expenses 424 275 395 323 288PBT 224 956 1109 1543 2205Tax 175 172 271 381 530Adjusted PAT (Inc MI) 60 793 895 1153 1576Growth (%) (88.5) 1,223.6 12.8 28.8 36.7Source: Company, Karvy Research

Exhibit 24: Balance SheetYE Mar (Rs. Mn) FY13 FY14 FY15 FY16E FY17E

Cash & cash Equivalents 575 540 441 826 804Receivables 3055 2915 3176 4167 5230Inventory 2527 1867 2308 2830 3727Loans & Advances (short&long) 1157 2032 1944 2193 2756Investments (Current & non current) 0 245 289 267 578Net Block 5342 5418 5861 5851 5829Other current assets 73 105 197 212 231Total Assets 12729 13122 14216 16346 19156Current Liabilities 4242 4088 4589 5792 7326Long term debt 4673 4886 4451 4041 3605Other Liabilities 301 253 269 406 437Total Liabilities 9216 9228 9309 10239 11368Shareholders Equity 396 395 607 607 607Reserves & Surplus (Inc MI) 3117 3499 4300 5500 7181Total Networth 3513 3894 4907 6107 7788Total Networth & Liabilities 12729 13122 14216 16346 19156Source: Company, Karvy Research


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Exhibit 25: Cash Flow StatementYE Mar (Rs. Mn) FY13 FY14 FY15 FY16E FY17E

PBT 224 956 1109 1543 2205 Depreciation 771 478 603 712 759 Tax Paid (234) (169) (241) (381) (530)Inc/dec in Net WC (662) (1529) 1394 (436) (1024)Other Items 207 87 177 254 215 Cash flow from operating activities 307 (177) 3042 1692 1626 Inc/dec in capital expenditure (1157) (696) (809) (711) (737)Inc/dec in investments 189 (0) 24 22 (311)Others 278 (587) 273 25 42 Cash flow from investing activities (691) (1282) (512) (663) (1006)Inc/(dec) in borrowings 560 1621 (1946) (410) (436)Dividend paid (70) (49) (99) (99) (99)Others (382) (238) (338) (323) (288)Cash flow from financing activities 108 1334 (2383) (833) (824)Net change in cash (276) (125) 147 195 (204)Source: Company, Karvy Research

Exhibit 26: Key RatiosYE Mar FY13 FY14 FY15 FY16E FY17E

EBITDA Margin (%) 5.0 7.9 9.4 9.7 9.9EBIT Margin (%) 1.5 4.9 6.4 6.8 7.4Net Profit Margin (%) 0.3 5.0 4.5 4.7 5.1Net Debt/Equity (x) 1.2 1.1 0.9 0.6 0.4RoE (%) 1.7 21.6 20.9 22.1 24.1RoCE (%) 4.0 9.2 14.0 17.5 22.0Source: Company, Karvy Research

Exhibit 27: Valuation ParametersYE Mar FY13 FY14 FY15 FY16E FY17E

EPS (Rs.) 0.3 3.8 4.3 5.5 7.5BV (Rs.) 16.5 18.6 22.3 27.5 34.9PE (x) - 24.1 21.4 16.6 12.2P/BV (x) 5.5 4.9 4.1 3.3 2.6EV/ EBITDA (x) 21.1 18.2 12.4 9.7 7.6EV/Sales (x) 1.1 1.4 1.2 0.9 0.7Source: Company, Karvy Research


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Stock Ratings Absolute ReturnsBuy : > 15%Hold : 5-15%Sell : <5%

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Dec 18, 2015 Industrials - Electrical Equipment ... · PDF fileMinda Corporation Ltd India ... services was established ... FY17E on account of full year impact driven by new business

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