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HDFC Securities Retail Research
Valuation and Recommendation
We expect Uniparts India Ltd.'s revenue/profit after tax to grow at 13% compound annual growth rate over FY23-25E led by ramp-up of new/recently added customer orders for existing and adjacent products.
We expect sales momentum to resume and raw material costs to reduce going forward.
We believe investors can buy the stock in Rs 645-660 band and add on dips in Rs 585-595 band (10 times FY25E earnings per share) for a base case fair value of Rs 707 (12 times FY25E EPS) and bull case fair value of Rs 766 (13 times FY25E EPS) over the next two-three quarters.
China plus one strategy adopted by the global original equipment manufacturers post the pandemic is resulting in higher request for quotes which augurs well for the company.
The agriculture and construction equipment end markets in most major geographies are witnessing continued recovery and strength. While the underlying industry is cyclical in nature, customer commentary suggests that demand continues to be healthy for both tractors (owing to supportive crop prices, labour shortage, and higher average tractor age) and construction equipment (owing to U.S. infra spends).
Even in India, the thrust on infrastructure and increasing mechanisation in agriculture would drive demand for construction equipment and tractors.
About the company
Uniparts is a leading supplier of systems and components for the off highway market with a global footprint. It is a global leader in three point linkage with a 16.7% market share.
It is also leveraging its relationships to expand its precision machined parts business wherein it has a 5.9% market share. Over the last year the company has received new business and has been approved by new / existing customers for new products.
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