This midcap auto ancillary stock gains 12% to hit all-time high; here is why

Shares of mid-cap auto ancillary stock Uno Minda in Thursday’s trade (June 20) marked an all-time high of Rs 1,180.80 after surging as much as 12 per cent intraday. The sharp rally in the stock was triggered after global brokerage Goldman Sachs initiated its coverage on the stock with a ‘buy’ rating and a target price of Rs 1,350. The set target implies a potential upside of 28 per cent from the last closing price.

At the last count, shares of the company were up over 4 per cent at Rs 1098.9 per share on the BSE.

As per the brokerage, the company is well-positioned to register growth in the country’s auto components industry. Further, it is drawing huge benefits on the back of the ongoing premiumization in the auto ancillary space.  Also, it has increased its focus on alloy wheels as well as the electric vehicle or EV segment.

Currently, Uno Minda enjoys over 50 per cent market share in auto switches and more than 40 per share in 4W alloy wheels.

Segment          Market Share
Auto Switches            50%+
Alloy Wheels              40%+
Lightning                    25%

The brokerage said localisation in high-margin alloy wheels segment lends support to the company’s profit growth visibility.  Besides, the brokerage is bullish on Uno Minda due to stable margins, and there is expected growth in both the 4W lighting and 2W alloy wheel segments. 

The risks that the company faces as cited by the brokerage includes reaching the peak share in switches segment, a potential slowdown in auto demand and a robust focus on growth which might overlook free cash flow at the company.

About Uno Minda

UNO Minda, formerly Minda Industries, is a global supplier of proprietary automotive solutions and systems to OEMs. The company is a mid-cap entity with a market capitalisation of Rs 62,678.5 crore at the last count.