About the Company

Minda Industries is a supplier of automotive solutions to original equipment manufacturers. The Company offers a range of products across various verticals of auto components, such as switching systems, acoustic systems and alloy wheels, among others.

Q1 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 522.58 521.41 0.22% 551.71 -5.28%
PBT 29.15 34.35 -15.14% 56.57 -48.47%
PAT 22.61 27.44 -17.60% 43.57 -48.11%

 

Consolidated Financials (In Crs)
  Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 1446.67 1436.32 0.72% 1599.53 -9.56%
PBT 84.11 114.11 -26.29% 109.83 -23.42%
PAT 62.33 84.6 -26.32% 84.78 -26.48%

 

Detailed Results

    1. The company had a flat quarter revenue-wise with a drop in consolidated profits of 26% YoY.
    2. The EBITDA margins have been maintained at 11.96%.
    3. The revenue shares of most segments remained as it is except switches and lighting which saw a drop and rise of 3% respectively. There was a shortfall of Rs 43 Cr in switches which were mitigated by a rise of the same magnitude in Lighting revenues.
    4. Almost 83% of revenues were from domestic sources while 17% were from exports. In terms of channels, 92% of revenues were sourced from OEMs while 8% were from the replacement market.
    5. Out of the 26 product lines of the company, only 3 lines will require changes to continue on the onset of BS-VI regulations while 5 product lines will be positively impacted by the new regulations. This shows the robust nature of its product portfolio.
    6. Light Metal technology continues to be important for the company as it contributes only 14% to revenues but accounts for 32% of total EBITDA.

Investor Conference Call Highlights

  1. Like most auto OEMs, the company is also expecting some prebuying in H2FY20 to bring up volumes before BS-VI regulations come into place on March 2020.
  2. The company was able to maintain its revenues and margins despite industry slowdown challenges due to robust cost control through cost management and various other austerity measures.
  3. The PBT declined substantially about 26% YoY on account of lower operating leverage and partial utilization of new facilities which resulted in higher depreciation.
  4. The management has reassured that they will remain cautious in making new investments and capital expenditures.
  5. Finance costs were higher this year due to a rise in total borrowings to Rs 1119 Cr from Rs 546 Cr last year. Most of this debt is has been undertaken for investments into TG Minda, controllers, 2 wheeler sensors, etc.
  6. The 4 wheelers business division has received new business from the newly launched venue of Hyundai.
  7. The Light Metal Technologies division saw a good uptick with revenues close to Rs 200 Cr and EBITDA margins of 26%. This segment benefitted from better operational efficiency, favorable commodity prices, and improved customer mix.
  8. The company is moving forward with the proposed merger of the 4 wholly-owned subsidiaries. They have filed the merger schemes with the exchanges and they expect to get this merger done by the end of the fiscal year.
  9. The company has also received new orders from Kawasaki and PSA for engine speed and oil temperature sensors.
  10. The capacity utilization for the alloy wheel section is almost 50% in Gujarat and 70% in the Bawal facility. The 4 wheel lighting division is close to 85%. In the 2 wheeler lighting division volumes dropped 6% and capacity utilization is between 80-85%.
  11. The acoustics business has been flat with capacity utilization close to 90%.
  12. In the sensor division, the company expects annual revenues of Rs 120-130 Cr based on the existing plant. The new plant in this division should be running by the second half of the year.
  13. The telematics division netted Rs 50 Cr this year and the company expects this figure to rise to Rs 90-100 Cr by next year.
  14. The company expects Capex for the year to be at Rs 350 Cr plus Rs 150 Cr. The 350 Cr is earmarked for 3 new projects earlier this year.
  15. The management is working to keep revenues and margins sustained at current levels in this difficult environment for auto and auto ancillary sectors.
  16. The management maintains that long-term sustainable margins for the LMT division should be around 20%. The company was able to deliver 26% margins in the current quarter from this division mainly due to a fall in aluminum prices.
  17. The 2 wheeler alloy business will be independent of Minda Kosei mainly because Kosei is a global 4 wheeler alloy maker and they do not have any 2 wheeler exposure. This division is expected to be commissioned by April 2020.
  18. The management expects pressure on volumes from OEMs and aftermarket sales to remain resilient at current levels.
  19. The management expects to complete the Harita consolidation transaction by January.
  20. The company is targeting all OEMs for their LMT division. The anchor customer for this division is Bajaj Auto.
  21. The EBITDA margins for acoustics in India is around 19% while it is around 6% for global operations. Overall margins for this division were at 6% and are expected to improve over time as initial costs of starting new units have kept margins low for this division.

Analyst’s View

Minda Industries has been one of the top auto ancillaries in the country. They have steadily expanded their product offerings such that their kit value is increasing year on year with the addition of newer products in the mix. Their foray into alloy wheels has rewarded them well and is expected to deliver good growth for the company in the future. Despite the slowdown in the auto market, Minda aspires to maintain a double-digit growth rate mainly on the back of their expanding product portfolio and the greater demand for their products post-BS-VI implementation. But at the same time, they are totally dependent on the domestic auto market very heavily and any negative surprise in this sector or from one of their key clients like Maruti may put a question mark over their growth trajectory. Nonetheless, Minda Industries is definitely one stock to keep an eye on as they seem to be one of the companies best positioned to benefit rapidly once the BS-VI regulations are implemented and become the norm.

 


 

 

Q4 2019 Updates

Financial Results & Highlights

                                                                Standalone Financials (In Crs)
Q4FY19 Q4FY18 YoY % Q3FY19 QoQ % FY19 FY18 %  Change
Sales 551.71 510.24 8.13% 517.61 6.59% 2146.72 1942.2 10.53%
PBT 56.57 46.65 21.26% 36.87 53.43% 185.9 172.68 7.66%
PAT 43.57 35.77 21.81% 28.35 53.69% 144.2 132.92 8.49%
                                                                Consolidated Financials (In Cr)
Q4FY19 Q4FY18 YoY % Q3FY19 QoQ % FY19 FY18 %  Change
Sales 1499.53 1383.26 8.41% 1472.79 1.82% 5935.15 4581.64 29.54%
PBT 109.83 157.35 -30.20% 107.78 1.90% 454.68 405.47 12.14%
PAT 76.44 134.85 -43.31% 79.44 -3.78% 320.61 307.78 4.17%

 

Detailed Results

    1. The company had a good FY19 with consolidated revenues rising almost 30% YoY which rises to 32% net of excise duty.
    2. The revenue division for Q4 and FY19 respectively are:
      • Switches: 8% & 37.9%
      • Lighting: 1% & 21.9%
      • Acoustics: 7% & 12.1%
      • Others: 4% & 28.1%
    3. The company’s revenues are almost evenly divided in 4 wheelers and 2/3 wheelers.
    4. 89% of the company’s revenues are in the replacement channel and only 11% are used directly by OEMs.
    5. Around 84% of sales of the company take place abroad while only 16% are sold in India.

Investor Conference Call Highlights

  1. The company has experienced low demand environment in H2FY19 due to regulatory challenges, rising insurance costs and transition from BS IV to BS VI.
  2. Their new 2wheeler and 4wheeler plant is set to start production April ’20.
  3. The company has already received an order for one of their BS VI virtual centres from a leading OEM.
  4. The company had borrowed Rs 130 Cr last year for financing projects of KPITs and TATA and some other projects which caused the interest costs to rise for FY19.
  5. The controller plant should start production from Q2 of FY20 onwards.
  6. In FY19, the company underwent a capex of Rs 450 Cr. According to current estimates, the capex for FY20 should be around Rs 400 Cr.
  7. The management hopes to secure around 30% of market share in the next few years for the company in market systems space.
  8. The management is confident of double digit growth for the company excluding the Harita and the 2wheeler divisions.
  9. The company is targeting an EBITDA margin of 12%-12.5%. They aim to sustain at these margin levels mainly by improving product mix.
  10. The switch business Minda Rika has been adversely affected by the volume cuts in the 4 wheeler business and thus margins for this division have also been lower.
  11. Alloy wheels business has been good for the company with around Rs 300 Cr in revenues in FY19. The company aims to double this figure to Rs 600 Cr in FY 20.
  12. The management has said that capacity utilization has been operating in between 75% to 90% in the past financial year.
  13. In the current year capex, around Rs 300 Cr is expected to go in the alloy wheels division with Rs 84 Cr in control and Rs 125 Cr in the sensor divisions.
  14. The company is aiming to be spend around 3%-4% of revenues in R&D each year.
  15. Around 78% of the alloy wheels business is sold to only one client which is Maruti.
  16. Despite the slowdown in auto market, the company aims to deliver double digit growth in FY20 mainly in the back of their larger product portfolio (like the addition of alloy wheels) and their increased Kit Value which has been growing and is expected to stay that way. The management also expects Harita to add an additional Rs 1000 Cr to revenues in FY20 thus increasing their confidence in meeting their growth targets.
  17. The company’s net debt level was at Rs 950 Cr in FY19. The management maintains that they will sustain the debt to equity ratio at the current levels of nearly 0.5 for the near future.
  18. The company expects the revenue potential of BS VI and electric vehicles to be above Rs 700 Cr for the sensor and controller divisions in the next 3-4 years. Currently they are only accounting for Rs 100 Cr from these factors in FY20.
  19. The management is expecting the market share in airbags to improve from current level of 23% in the following year.
  20. The company is also expecting faster penetration in LEDs for 4 wheelers which has been slow until now.

Analyst’s View

Minda Industries has been one of the top auto ancilliaries provider in the country. They have steadily expanded their product offerings such that their kit value is increasing year on year with the addition of newer products in the mix. Their foray into alloy wheels has rewarded them well and is expected to deliver good growth for the company in the future. Despite the slowdown in the auto market, Minda aspires to maintain a double digit growth rate mainly on the back of their expanding product portfolio and the greater demand for their products post BS VI implementation. But at the same time they are totally dependent on the domestic auto market very heavily and any negative surprise in this sector or from one of their key clients like Maruti may bring their growth to standstill easily. Nonetheless, Minda Industries is definitely one stock to keep an eye on as they seem to be one of the companies best positioned to benefit rapidly once the BS VI regulations are implemented and become the norm.

 

Disclaimer

This is not an investment advice. Please read our terms and conditions.