Shares of Uno Minda Limited have delivered over 9,100 per cent return to its long-term shareholders in the last 10 years. From trading around Rs 5 in 2013, the stock is hovering around Rs 450 right now. The multibagger stock is currently down over 38 per cent from its 52-week high of Rs 604, hit on September 9, 2022.
Kotak Institutional Equities, in its recent report, has upgraded Uno Minda to ‘Buy’ (from ‘Add’) as valuations have become more palatable given the stock price correction of 15% in the past one month.
It believes that the near-term outlook for the auto industry remains bleak given multiple headwinds; however, the brokerage firm continues to remain constructive on the company’s medium-term growth prospects driven by an increase in content due to premiumization and the addition of newer products and order win across product segments, including EV, resulting in market share gains.
Kotak expects the near term to remain challenging for Uno Minda given weakening demand trends in both 2 wheeler and passenger vehicle segments. Overall, it expects domestic PV segment volume growth to moderate in FY2024E (low single-digit growth on a YoY basis) as waiting periods are coming off with waning pent-up demand and increasing cost of ownership due to upcoming regulatory norms.
Similarly, the brokerage also expects any recovery in domestic 2W segment volumes to remain muted on account of the increased cost of ownership due to OBD2 norms and weak rural demand. Also, El Nino could further delay the recovery in rural demand, which could weigh on demand for entry-level segment vehicles.
Kotak said the company is well positioned to outperform the automotive industry growth led by an increase in content driven by the premiumization trend, an increase in kit value aided by the expansion of the product portfolio across segments and powertrain, market share gains in lighting and electronics businesses and growing order book in sensors and controller businesses driven by the focus on localization.
“With Uno Minda having the operational control of Kosei Minda Aluminium, we expect the profitability of the JV to improve significantly led by a reduction in overhead costs and higher utilization levels. We remain optimistic on growth prospects for the alloy wheel industry, which will be driven by import substitution and increased penetration levels in the PV segment,” it added.
Recently, Uno Minda announced that its Board had approved the acquisition of an 81.69 % stake in Kosei Minda Aluminum Company Private Limited and a 49.90% stake in Kosei Minda Mould Private Limited from joint venture partner Kosei, Japan (“Kosei”).
The acquisition is planned through a composite scheme of merger with Uno Minda Ltd through a swap of shares. The enterprise value of KMA and KMM considered for the purpose of the transaction is Rs 60 crore and Rs 11 crore respectively.
About Uno Minda
Uno Minda Limited (formerly Minda Industries Limited) is a global supplier of proprietary automotive solutions and systems to OEMs as Tier-1. Incepted in 1958, It is one
of the manufacturers of automotive switching systems, automotive lighting systems,
automotive acoustics systems, automotive seating systems and alloy wheels in India.
The company manufactures and supplies over 20 categories of automotive components and systems to leading Indian and international OEMs based in India, Asia, South and North America and Europe.
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