• Mayank Mehraa CFA, FRM

Minda Industries - IoT in Automobiles


We have maintained a positive outlook in the Indian auto space for a while now, with our investments in Eicher Motors, M&M and Balkrishna Tyres . starting to bear fruit. However, we have decided to shift into Auto Ancillaries. In a time and age where internet is turning into a basic necessity we have been looking for companies and businesses which would be a beneficiary of the same. While, most other Auto ancillary players are involved with heavier machinery, higher capital requirement and competitions across the globe. Minda Industries deals with auto parts with less competition and has been growing with a smaller capital base into high margin sectors like IoT (car location system), Alloy wheels, automotive switches, horns, lighting and other necessary parts.


Minda Industries (CMP- Rs. 58)

A growth story built on developing synergies and acquisitions across auto parts. However our chief intent behind research in Minda is based on them launching a smart device solution - The Minda Connect . The device allows live location and monitoring of any vehicle bearing the device from a remote location. Given the current growth trends in logistics, courtesy of E- Commerce and online shopping we believe in the way ahead such a device might just become mandatory.

Minda recently acquired Carlton Horns which is a market leader in the horns market across Europe. Way ahead we strongly believe Minda would acquire other such market players in niche industries expanding its position and growing margins. With Minda getting into alloy wheels and being in a dominant position in the auto switch segment, we believe Minda should be able to position itself in industries where a bigger player wouldn't bother- hence reducing competition.

Growth

Minda has grown operating profit consistently at 12.88% CAGR over the past 5 years since 2011. Majorly involved in automobile switches the company will be a major beneficiary if the fashion trends continue towards switches and infotainment systems. Sales have consistently grown at 18.5% CAGR, way ahead we believe Minda's involvement in Niche segments should aid margin expansions and better profitability. Currently trading at a market cap of 1390 Cr, Minda has a long way to go, our expected revenues from the company at end of FY22 is 4x the current Market Cap justifying an upside from current levels of at least 4x unless margins fall or any unforeseen circumstances arise. The company is not a fan of giving away dividends which implies the company is consistently buffing up on the reserves which gives us a valuation comfort for a growth stock.

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Edits

Stock price adjusted for bonuses.

 

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