Uno Minda's Stock Soars on EV Expansion and Strong Financial Performance


6/7/20243 min read

Uno Minda, an auto component maker, saw its stock rise by 13% on Thursday following the announcement of a technical licensing agreement with Suzhou Inovance Automotive Company, a China-based firm. This partnership will enable Uno Minda to develop, manufacture, and sell electric powertrain products for four-wheelers. Over the past month, the company's stock has gained 33%, fueled by better-than-expected fourth-quarter results for the fiscal year 2023-24 (Q4 FY24).

The recent surge in Uno Minda's stock is primarily driven by the collaboration with Inovance, focusing on high voltage electric vehicle (EV) products for both passenger and commercial vehicles in India. The portfolio includes charging control units, inverters, motors, and three-in-one electric drive systems (e-axles). The management emphasized that this partnership will significantly enhance Uno Minda's electric four-wheeler (e-4W) product range, positioning the company to better serve the expanding Indian EV market. There are plans to evolve this technical collaboration into a joint venture.

Analysts Rishi Vora and Praveen Poreddy from Kotak Institutional Equities highlight that the potential value of the e-axles and AC chargers could range from Rs 1.5 lakh to Rs 2.5 lakh per kit. They project that Uno Minda could generate around Rs 2,600 crore in revenue from these products by 2030, assuming 20% of passenger vehicles become electric and Uno Minda captures a 10% market share. This collaboration is anticipated to contribute about 6-7% of the company's consolidated revenues in the future. Kotak Institutional Equities maintains an 'add' rating with a target price of Rs 930 per share.

In March, Uno Minda also entered into a technical license agreement with StarCharge for the production and supply of electric vehicle supply equipment for four-wheelers. The potential kit value for this product is estimated at Rs 15,000.

The stock's rally over the past month has been bolstered by strong revenue growth and margin expansion in the March quarter. The company reported a 31% year-on-year increase in sales, driven by robust two-wheeler and passenger vehicle volume growth, supported by festive sales. The growth was further fueled by ramped-up production of EV facilities and new orders for alloy wheels, castings, sensors, and controllers. Operating profit margins improved by 170 basis points sequentially to 12.5%, partly due to price increases.

Nomura Research analysts Siddhartha Bera and Kapil Singh believe Uno Minda is benefiting from strong demand for feature-rich new models by automakers, which is enhancing its market share in lighting, alloy wheels, and controllers, among other segments. They expect significant growth in smaller segments like sensors, actuators, controllers, and electric vehicles in FY25 and FY26, driven by more EV launches and rising penetration. This growth is expected to sustain revenue growth momentum at 17-20% over the next two years, with entry into new segments acting as a catalyst. Nomura Research has a 'buy' rating with a target price of Rs 945 per share.

On June 6, Uno Minda's shares skyrocketed 19%, reaching a 52-week high of Rs 1,025 after the Inovance deal announcement. The company emphasized that this deal would significantly expand its electric four-wheeler product portfolio to cater to the growing Indian EV market. The company aims to strengthen this partnership by transitioning it into a joint venture, pending necessary approvals. The selected EV products include Charging Control Units (CCU), EV inverters, EV motors, and next-generation 3-in-1 electric drive systems (e-Axle).

In its quarterly earnings for January-March, Uno Minda reported a 59% year-on-year increase in profit to Rs 289.1 crore, up from Rs 182.6 crore in the corresponding quarter of the previous fiscal year. The company's revenue from operations during the quarter stood at Rs 3,794 crore, marking a 31.3% year-on-year increase from Rs 2,889 crore in the same quarter of the previous fiscal year.

At 12:08 pm, Uno Minda's shares were trading 14.77% higher at Rs 988.20 on the NSE.

In related news, Orchid Pharma Ltd saw its shares rise by 9% on June 6 after receiving approval from the Drugs Controller General of India (DCGI) to market its antibiotic drug combination for treating complicated urinary tract infections (UTIs). The company announced the approval of its newly invented Enmetazobactam, a new chemical entity (NCE) active pharmaceutical ingredient (API), which will be used in combination with the antibiotic Cefepime as a dry powder injectable. This marks a significant milestone for Orchid Pharma as it expands access to advanced and affordable treatment options for patients in India.

At 3:30 pm, Orchid Pharma's shares closed 5.72% higher at Rs 1,056 on the NSE.