Buy Minda Industries, target price Rs 320: ICICI Direct

ICICI Direct has given a buy rating to Minda Industries with a 12-month target price of Rs 320. The share price moved down by -0.09 per cent from its previous close of Rs 271.30. The stock’s last traded price is Rs 271.05.

Minda Industries reported a subdued Q4FY20 performance. Consolidated revenues were at Rs 1,339 crore, down 10 per cent year on year. Consolidated EBITDA margins slid 320 bps quarter on quarter to 9.1 per cent tracking higher other expenses (includes month to month losses on forex of Rs 15 crore). Reported PAT for the quarter was at Rs 7.3 crore, hurt by fall in revenues, margins (down 340 bps year on year) and Rs 8.9 crore worth of exceptional charges for acquisition related expenses. For full year FY20, consolidated sales fell 7.5 per cent year on year to Rs 5,465 crore, with margins down 100 bps year on year to 11.3 per cent and reported PAT down 46 per cent year on year to Rs 155 crore.

Investment Rationale

The brokerage expects net sales, EBITDA, PAT CAGR of 9.8 per cent, 14.2 per cent, 30.4 per cent CAGR, respectively, over FY20P-22E. It continues to like Minda for its success in growing far ahead of ancillary pack and OEM clients over the years; the presence in emerging opportunities and well diversified product and client base. ICICI direct maintains a buy recommendation on Minda Industries with a revised target price of Rs 320, valuing it at 12 times FY22E EV/EBITDA i.e. implied 33 times P/E (FY22E EPS).

The brokerage is waiting for the brief contours of the proposed rights issue before incorporating it in its estimates.

Changes in Estimates


Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 1338.97 crore, up 0.91 per cent from last quarter sales of Rs 1326.84 crore and down -9.92 per cent from last year's same quarter sales of Rs 1486.46 crore. The company reported net profit after tax of Rs 13.12 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 70.79 per cent stake in the company as of March 31, 2020, while FIIs held 10.91 per cent, DIIs 6.63 and public and others 11.66 per cent.