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Minda Corp: Partnership with Flash Electronics bodes well for EV expansion

Minda Corp share: Minda Corp share price has surged 9.1 per cent in two days as against a 1.1 per cent rise in the benchmark BSE Sensex index.

Only 12 of 82 approved applicants, or nearly 15 per cent, under the production-linked incentive scheme for the automobile and auto component industry (PLI-Auto) have achieved the mandated 50 per cent domestic value addition (DVA) target, according to

Nikita Vashisht New Delhi

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Minda Corp share, Minda Corp news: Analysts are impressed with Minda Corp’s latest announcement to enter into a strategic partnership with Flash Electronics. Riding on expectations that Flash Electronics will chart robust profit growth, and provide cross selling opportunities to Minda, analysts have retained their 'Buy' calls on the stock.
 
"Flash is likely to witness robust profit growth from Rs 60 crore in financial year 2023-24 (FY24) to Rs 110 crore in FY26 (estimated), while Minda's share of profits shall be Rs 50 crore. Furthermore, Minda can potentially cross-sell and achieve cost synergies, as there are adjacent product portfolios in body electronics (Minda has vehicle access, electrical distribution system, telematics, and die casting) and powertrain electronics (Flash has ignition and powertrain components)," said a note by Nuvama Institutional Equities.
 
 
On the bourses, Minda Corp share price has surged 9.1 per cent in two days as against a 1.1 per cent rise in the benchmark BSE Sensex index.
 

Minda Corp-Flash Electronics deal

 
As part of the deal, Minda Corp shall make a strategic purchase of 49 per cent equity stake in Flash Electronics for an all-cash transaction of Rs 1,370 crore, implying an estimated valuation of 25-times FY26 price-to-earnings (P/E).
 
The management estimates the acquisition shall be earnings per share (EPS) accretive in FY26, as growing profits of Flash and synergy benefits shall offset funding costs.
 
Flash is a leading manufacturer of ignition and electronics products for internal combustion engine (ICE) vehicles in two and three-wheelers space, and is among the market leaders for motors, motor controllers, vehicle control units, etc.
 
Across the 2W, 3W, passenger vehicles (PV) and commercial vehicles (CV) segments, Flash products include traction motors, motor controller unit, and brushless-direct current (BLDC) motors with fan assembly, primary gears, indoor unit (IDU) mid-drive motors, telematic control unit, vehicle control unit, inverters, and wiper motors.
 
It earned revenue at a compounded annual growth rate (CAGR) of 17 per cent in the past, which is projected to touch Rs 1,590 crore in FY25E, with earnings before interest, tax, depreciation and amortisation (Ebitda) margin at around 14 per cent and return on capital employed (RoCE) at 22 per cent.
 
Further, in FY26, Flash is estimated to generate net profit of Rs 110 crore. Notably, Flash has been undertaking capex of Rs 50-60 crore per annum, which is seen continuing going ahead.
 
Debt levels are seen declining to Rs 300 crore by March, 2025, (compared with Rs 530 crore in FY24, including lease liability).
 
Through the partnership, Minda Corporation aims to provide complete automotive solutions across segments in electric vehicles (EVs) and leverage the respective strengths of the two companies across products, technologies, and customers to deliver synergies in cross-selling, new customer addition, and exports.
 
Analysts, too, see Minda enjoying cross-selling opportunities with Flash’s customer base, including Audi, BRP Rotax, Ducati, Moto-Morini, Porsche, Proton, Volkswagen, and Webasto.
 

Financial benefits

The combined entity may see its kit value in ICE rising to Rs 11,000-12,000 per unit (from Rs 5,000-6,000 now); 2W EV kit value rising to Rs 30,000-35,000 per unit (from Rs 18,000-20,000 per unit now) – which may rise further to Rs 40,000-42,000/unit due to premiumisation tailwinds in existing products.
 
"Flash has over 20 per cent market share in one of the E-2W market leaders; as a combined entity, revenue from EVs is seen rising to 10-12 per cent going ahead (vs 5-6 per cent now for Minda) – much ahead of competition. After this transaction, Minda Corp would add ‘Powertrain Electronics’ as a new vertical," noted those at Emkay Global Financial Services.
 
Moreover, Minda expects the net debt-to-equity ratio of the combined entity at 0.6x, and net debt-to-pro forma Ebitda staying below 1.8x.
 
"Minda is a play on premiumisation, import substitution, regulatory changes, and disruptions such as EV penetration. It has built scale through tie-ups with Stoneridge, VAST, Infac, and EVQPOINT in recent past, and we forecast the recent Flash acquisition shall also support entry in emerging segments/components, increase in content per vehicle (CPV), and customer additions,"said Nuvama Institutional Equities with a ‘Buy’ rating with a share price target of Rs 590.
 
Those at Axis Securities, too, liked Minda Corp's growth story driven by increasing kit value per vehicle, focus on EV, removal of drag from loss-making operations, and inorganic acquisition/ strategic TLAs.  The brokerage has increased its share price target to Rs 600 per share, from Rs 535/share.  "On account of the slower-than-expected recovery in exports, PV/CV industry volumes and the current valuations, we maintain our 'Hold' rating owing to a limited upside potential. However, we recommend a 'Buuy' on dips strategy for the stock," it noted.
 

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First Published: Jan 16 2025 | 12:21 PM IST

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