KRChoksey Research has revised its rating for Minda Corporation Limited, a prominent player in the Indian auto ancillary sector, from "Accumulate" to "Buy." The firm has set a target price of Rs 554, indicating a 16.3% potential upside from the current market price of Rs 477. The upgrade is underpinned by robust Q2FY25 results, a strong order book, and strategic expansion plans aimed at capturing emerging opportunities in the electric vehicle (EV) and premium segments.

Q2FY25 Financial Performance

Revenue Growth: Minda Corporation reported its highest-ever quarterly revenue of Rs 12,900 million, reflecting a 7.9% year-on-year (y-o-y) growth and an 8.2% sequential increase. The performance exceeded estimates by 5.5%, driven by strong domestic demand in the two-wheeler (2W) and passenger vehicle (PV) segments.

EBITDA Performance: EBITDA for the quarter stood at Rs 1,466 million, representing an 11.6% y-o-y and 11.2% quarter-on-quarter (q-o-q) increase. The EBITDA margin expanded by 38 basis points (bps) y-o-y to 11.4%.

Profitability: Adjusted Profit After Tax (PAT) rose by 26.5% y-o-y to Rs 743 million, supported by higher operating efficiency and other income. The company maintained robust margin management amid challenging macroeconomic conditions.

Order Book and Expansion Plans

Record Order Wins: Minda Corporation secured orders worth Rs 24,000 million in Q2FY25, with 25% of these linked to EV platforms. The H1FY25 order book surpassed Rs 47,500 million, driven by product diversification and increasing demand for internal combustion (IC) and EV components.

Capacity Expansion: The company is establishing four new facilities to cater to die-casting, instrument clusters, and wiring harnesses. These facilities are expected to reach peak utilization within 2.5 years, supporting both replacement demand and new business.

Strategic Land Acquisition: Minda Corporation acquired 24 acres of land in Uttar Pradesh for future expansion, underscoring its commitment to long-term growth.

Segmental Performance

Mechatronics and Aftermarket Segment: Accounting for 49.5% of total revenue, this segment grew by 8.7% y-o-y and 11.1% q-o-q, driven by increased demand for two-wheelers and premium products.

Information and Connected Systems Segment: Representing 50.5% of total revenue, this segment witnessed a 6.7% y-o-y and 5.5% q-o-q growth, reflecting its resilience despite global market challenges.

Fibonacci Levels and Stock Trends

Key Fibonacci Levels:

23.6%: Rs 500
38.2%: Rs 515
50.0%: Rs 530
61.8%: Rs 545
76.4%: Rs 565
Volume Highlights: The stock recorded its highest trading volume on July 9, 2024, with approximately 1.5 million shares traded, coinciding with strong investor sentiment post-results.

52-Week High and Low: Minda Corporation's 52-week high was Rs 652, achieved on August 10, 2024, while its 52-week low was Rs 335, recorded on November 15, 2023.

MACD and Bollinger Bands Analysis

MACD Analysis: The Moving Average Convergence Divergence (MACD) indicator recently crossed above the signal line, signaling potential bullish momentum in the short term.

Bollinger Bands: The stock is trading near the upper Bollinger Band, suggesting overbought conditions. Investors should remain cautious about potential short-term corrections while maintaining a positive long-term outlook.

EV and Premium Segment Opportunities

Minda Corporation is strategically leveraging growth in the EV and premium automotive segments. Collaborations such as a licensing agreement with SANCO (China) have enhanced its EV wiring harness portfolio, enabling customized solutions for domestic and export markets. The EV product portfolio includes high-voltage connectors, EV charging equipment, and power distribution units.

Future Outlook and Valuation

Growth Projections: Revenue, EBITDA, and adjusted PAT are expected to grow at a CAGR of 9.9%, 18.4%, and 31%, respectively, between FY24 and FY26. Minda Corporation aims to increase export contributions from 8% to 15% in the medium term.

Valuation: The stock is trading at a P/E multiple of 36.1x FY25E EPS and 29.2x FY26E EPS. KRChoksey retains a target P/E of 34.0x for FY26E EPS of Rs 16.3, resulting in a target price of Rs 554.

Conclusion

Minda Corporation’s robust financial performance, strategic expansion initiatives, and focus on EV and premium segments position it as a key player in India’s evolving auto ancillary sector. Despite macroeconomic headwinds in export markets, the company’s strong order book and operational efficiencies underscore its long-term growth potential. With a "Buy" recommendation and a target price of Rs 554, investors can expect substantial returns driven by sustained demand and innovation-led growth.