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5 Reasons Why Uno Minda Could Steer Your Portfolio Up 🚘

Which car do you want to buy? Which company’s launching a kick-ass model soon? Which car is everyone talking about? These questions are easy to answer. But lets try this - who makes the horn in your car? Where do the seats come from? Who makes those swanky looking LED headlights?


At Rupeeting, we’re fond of the quiet companies, which work on the backstage, and make it big without anyone knowing. Look at our past few blogs, our investment recommendations and stock picks across our portfolios - they are filled with such names, from packaged foods to consumer electronics. Similarly, in the automobile space, we’ve been researching about a company called Uno Minda.


The reason it is fascinating is that - in India it is the largest maker of switches for vehicles, the number one maker of horns, the number one supplier of seats for buses and two-wheelers, and the third largest player in making lights. But while it has already achieved all of this, what will drive its future prospects?


1. More Components in Cars

Remember there was a global chip shortage a couple of years ago? At the height of this deficit in 2021, global automobile production had declined by 26%. Vehicles are increasingly getting smarter, and are being filled with more electronic components than ever before.


Also, each component that forms part of a vehicle has been seeing massive upgrades and is getting feature-packed. What a seat could do 5 years ago in a high-end vehicle, is what a mid-market vehicle now offers.


Uno Minda, at present, gets nearly half its revenue from components that fall in the ‘high upgrade’ category.


Revenue split for Uno Minda
Revenue split for Uno Minda

Revenue from these components is expected to continue rising as the features, and subsequently value of these parts continue rising in the future.


2. Collaborative Expansion

While Uno Minda is little heard of by the layman, it has been present since 1958. In fact, back then, it started off with just one product. And from there, over the years, through organic growth, partnerships and acquisitions, it now has a product portfolio which covers more than 50% of a vehicle.


Its expansion journey has gone from manufacturing basic ammeters for Royal Enfield in 1958 to switches in 1960, lights in 1980, batteries and fuel caps in 2007, casting products in 2010 and seats in 2021.


Central to this expansion has been Uno Minda’s strategy to collaborate with others. Just in the last 10 years, it has made at least 6 acquisitions and heavily expanded its presence. Notable amongst these are:

Acquisition

Year

Offering

Clarton Horn

2013

A leading manufacturer of automotive horns in Europe

Rinder Group

2016

The lighting business of the Spain-based Rinder group

iSYS RTH GmbH

2018

A specialised company in systems engineering, focusing on hardware and software for embedded systems and Electronic Control Units (ECUs) for top-tier makers like BMW and Rolls Royce

Delvis GmbH

2019

Lighting solutions for clients include Volkswagen, Audi and Porsche

KPIT Technologies

2019

Telematics division of KPIT and other products for school buses

Harita Seating Systems

2019

Automotive seating with customers like TVS Motors, Tata Motors and Daimler


Beyond acquisitions, the company has formed 12 JVs and 2 technical agreements, gaining access to new technologies and products.


3. Electric Vehicles (Of Course)

Other than the expansion in width and value, Uno Minda has also entered new high-growth segments to further propel growth - especially EVs. With EVs seeing exponential growth globally and in India, this is a space that just couldn’t be ignored.


It has started with a sharp focus on low voltage EV products, specifically two and three wheelers. Its product portfolio in this segment includes Battery Management Systems, on and off board chargers, RCD cables, body control modules, smart plugs, telematics and Acoustic Vehicle Alert Systems. Other than these, it has also started receiving orders for motor controllers, DC-DC converters and traction motors.


Uno Minda has been seeing strong traction in its two wheeler EV sales, with revenue going 2.5x in just the last one year.


EV sales for Uno Minda
EV sales for Uno Minda

This traction is expected to continue as Uno Minda is already sitting on an annual order value of nearly Rs. 2,500 crore (3.7x the current annual revenue run-rate) from two wheeler EV manufacturers - of which, ~70% is from EV specific components, and the rest are from engine agnostic components.


4. Entering the Aftermarket Business

With leadership already established in providing components to OEMs, Uno Minda has now taken a step towards establishing a B2C presence. It has entered the aftermarket space, with leadership in major product categories, continuous expansion of the product portfolio, and new product lines that include alloys, infotainment, seating and braking.


While this business commenced in 2016, it has already reached a quarterly revenue of Rs. 273 crore as of 3QFY24. It boasts a portfolio of more than 6,500 SKUs, 1.5 lakh workshops and 6 regions it exports to.


Uno Minda's aftermarket business
Uno Minda's aftermarket business

5. Heavy Capex Plans

While the company has historically grown through acquisitions, it is now focusing on scaling up its existing projects. It has announced major capex plans, with most projects set to be commissioned in FY25 and few in FY26.

Product

Spend

Capacity

Expected Start

4W Alloy Wheel

Rs. 542 crore

120K wheel per month (yet to be finalised)

2QFY26

4W Alloy Wheel

Rs. 190 crore

60K wheel per month (Bawal Plant)

2QFY25

4W Lighting

Rs. 400 crore

New Capacity

2QFY25

4W Switches

Rs. 110 crore

New Capacity

1QFY25

Airbags

Rs. 175 crore

1.2 million unit per annum

3QFY25

Seat Belts & Smart Systems

Rs. 200 crore

New Capacity

2QFY26

A total of Rs. 2,500 crore is being spent by Uno Minda over the next couple of years. Basis its historical fixed asset turnover ratio of 3.7, it would be able to at least strike an annual revenue run rate of Rs. 9,200 crore (71 % of FY24 revenue) once the capacities are fully functional.


Summing it Up

Over the last five years, Uno Minda has exhibited a revenue CAGR of 17% and EBITDA CAGR of 15%.

The company has the potential to continue growing at that rate thanks to:


  1. Continued increase in product portfolio, value of products and capacity expansion

  2. Newer opportunities like EVs and aftermarket services

  3. Potential collaborations, partnerships and acquisitions


In addition to these growth drivers, Uno Minda also benefits from sector-wide tailwinds, which include:


  1. Rising demand for automobiles in India given higher consumption, premiumisation and favourable demographics.

  2. The government’s boost to Make in India through initiatives like (i) PLI, which start in FY24, and have an increased budget allocation, and (ii) anti dumping, which is currently seen on passenger vehicle alloy wheels originating from China.


Given the multitude of opportunities staring at Uno Minda and the potential growth it can exhibit, you might want to start looking at who’s making your vehicle parts!

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