UNO MINDA (ERSTWHILE MINDA INDUSTRIES, MIL) REPORTED HEALTHY PERFORMANCE FOR Q2FY23

News:

Consolidated revenues for the quarter came in at Rs 2,877 crore (up 12.6% QoQ) vs. our estimate of Rs 2,709.4 croreConsolidated EBITDA for Q2FY23 stood at Rs 318.4 crore (our estimate Rs 291.3 crore), with attendant margins at 11.1%, up 66 bps QoQ (I-Direct estimate 10.8%). Gross margin remained flat QoQ (our expectation 40 bps QoQ decline) with savings realised under employee costs which were down 66 bps on QoQ basis at 12.7% of sales. The company largely realised operating leverage benefits. Reported consolidated PAT for the quarter stood at Rs 170 crore, up 22.6% QoQ (I Direct estimate: Rs 143.1 crore) aided by QoQ topline growth & higher than expected margins. On the strategy front, the company announced two major developments. (i) It plans to enter into JV with Buehler Motor GmbH ("BUEHLER") to develop, manufacture and market traction motors in India and other SAARC nations. The JV will offer traction motors for battery driven EV (Electric Vehicle) 2-W & and 3-W. (ii) Management informed about setting up of new 4W lighting plant in India with production from the same expected to start from Q4FY24E. The total capital expenditure (including sustaining capex) to be incurred over the period of five years in the project would be Rs 400 Crore with initial investment of Rs 230 crore spread over next two years as first phase to set up the new plant.

View:

 MIL is a key auto ancillary player domestically providing solutions in areas of Switches, Sensors, Lighting, Horns, Castings, Seating, Alloy wheels and Air-bag among others. It has a history of vast outperformance vs. user industries riding on growth in kit value, new client and product additions & inorganic acquisitions. It’s sales are more or less equally divided between the 2-W and 4-W (PV) space with Maruti Suzuki as one of tis anchor clients. Domestically we believe company is progressing well on the kit value increase with current focus on electronics and is approaching EV space with focus towards BMS, Chargers, Telematics etc.

Impact:

Positive