Electric vehicle portfolio to drive auto component maker Uno Minda growth

The stock of auto component maker Uno Minda is up 13 per cent in trade on Thursday after it announced a technical licensing agreement with China-based Suzhou lnovance Automotive Company. The company will develop, manufacture, and sell four-wheeler electric powertrain products. Over one-month period, the gains extend to 33 per cent given the better-than-expected fourth-quarter results in 2023-24 (Q4 FY24).

The immediate trigger for the stock is the technical collaboration with the Chinese company for the manufacture and sale of select high voltage category electric vehicle products for passenger and commercial vehicles in India. The range of EV products includes the charging control unit, inverter, motors, and three-in-one electric drive systems (e-axle). 

The management highlighted that the partnership will significantly expand Uno Minda's e-4W product portfolio, enabling it to effectively cater to the growing Indian EV market. The company is seeking to convert the technical collaboration into a joint venture going ahead. 

Rishi Vora and Praveen Poreddy of Kotak Institutional Equities point out that the potential kit value of the e-axles along with AC chargers can range from Rs 1.5 lakh to Rs 2.5 lakh. They expect the company’s revenue potential from the supply of e-axles and chargers to be around Rs 2,600 crore by 2030.

This is on the assumption that there would be 20 per cent electrification of passenger vehicles and the company will be able to take a 10 per cent market share. The collaboration could account for about 6-7 per cent of Uno Minda’s consolidated revenues going ahead. The brokerage has an 'add' rating with a target price of Rs 930 apiece. 

The company had earlier in March entered into a technical licence agreement with StarCharge for the manufacture and supply of electric vehicle supply equipment for four-wheeler electric vehicles. The potential kit value for this product, according to the company, is pegged at Rs 15,000. 

In addition to the technical tie-ups, what has helped the rally in the stock over the past month is the strong revenue growth and margin expansion in the March quarter.

The company’s sales saw a 31 per cent growth year-on-year (Y-o-Y) on robust two- wheeler and passenger volume growth aided by festive sales. The ramp-up in production of EV facilities and new order wins in alloy wheels, castings, sensors, and controllers added to the growth. Operating profit margins expanded 170 basis points sequentially to 12.5 per cent, partly aided by price increases. 

Siddhartha Bera and Kapil Singh of Nomura Research believe the company is a key beneficiary of strong demand for feature-rich new model launches by auto- makers, which are driving its market share gain in lighting, alloy wheels, and controllers among others. 

The brokerage expects stronger scale-up from small segments like sensors, actuators, controllers, electric vehicles in FY25 and FY226 with more EV launches and rising penetration. This is expected to sustain revenue growth momentum at 17-20 per cent over the next two years with the entry into new segments being another catalyst. The brokerage has a ‘buy’ rating with a target price of Rs 945 apiece.