Why Minda Industries Shares Are Up 200% in 6 Months

Shares of auto ancillary company Minda Industries have nearly tripled in value over last six months, hugely outperforming the benchmark CNX 500 index.

Stocks of auto and related companies have outperformed the broader markets in the last sixth months on hopes that economy recovery would lead to higher vehicle sales. Minda Industries is the domestic market leader in switches and horns segment.

Investors are also betting that the capacity expansion at Minda Industries will benefit the company when the auto market recovers. The company has set up two plants in Hosur(Karnataka) in last two years and has also expanded its lighting plant in Manesar(Haryana).

Minda Industries reported strong earnings in the second quarter. The flagship company of the NK Minda Group has reported four-fold jump in its net profit for the second quarter of FY15. It net profit in Q2 jumped to Rs 26 crore against Rs 5 crore year-on-year, while its revenues grew 27 per cent year-on-year to Rs 347 crore.

Sudhir Jain, executive director and group CFO at Minda Industries, told NDTV that its capacity expansion over the last two years has boosted its top-line and bottom-line growth. Improvement in operational efficiency has also boosted its quarterly earnings, he added. (watch interview)

Operating efficiencies as represented by its EBITDA margin increased 210 basis points year-on-year to 7.9 per cent in Q2 of FY15. This led to its gross profit jumping 73 per cent year-on-year to Rs 27 crore in the second quarter.

Minda Industries commands 61 per cent share in domestic switches market and 47 per cent in horns market. Its top clients include Bajaj Auto, TVS Motor, Honda and Maruti Suzuki.

Minda Industries management is positive about its future outlook, saying that expected recovery in commercial vehicle segment will drive their earnings. Mr Jain also said that auto manufacturers have asked to gear up their supply chains to meet the expected increase in future sales.

Shares in Minda Industries ended 1.30 per cent lower at Rs 620 apiece against 0.30 per cent decline in the broader Nifty on Thursday.