UNOMINDA - UNO Minda Limited Share Price

Uno Minda Limited's management provided an optimistic outlook during their earnings call for FY27, emphasizing their dual strategy aimed at driving growth while enhancing capabilities. They plan to allocate approximately INR 1,750 crores in capital expenditure, with around INR 650 crores designated for sustaining operations and INR 1,100 crores for growth initiatives. This includes potential land acquisitions in key regions like CSN, Hosur, and Gujarat due to customer expansions.

Management highlighted that FY27 is set to be a pivotal year, with seven of their eleven ongoing projects expected to commence production or ramp up significantly. They forecast an annual EBITDA margin of approximately 11% (plus/minus 50 basis points), despite recognizing ongoing challenges and initial costs associated with newly commissioned plants. They aim to leverage recent business wins and strategic partnerships to secure additional market share in high-growth segments, including EV powertrains and sunroofs.

Management expressed confidence in sustaining growth momentum in the automotive sector, buoyed by India's strong fundamentals, which reflect a resilient economy projected to grow at around 6.6% to 6.9% amid global challenges. They also reaffirmed their commitment to innovation, localization, and customer centricity, aligning with their goal of delivering long-term shareholder value while facilitating the shift towards a smarter and greener automotive landscape.

1. Question: "Just trying to understand, do we have visibility on the kind of order book that you can mention because the capex now for your 4-wheeler EV components will be like INR1,200 crores, including 3 facilities. So what gives us confidence to set up a second plant while the first one is still under construction?"

   Answer: We have excellent visibility on new business for both EDU and DST and strategic partnerships with customers. The push for a second plant is driven by the need to be closer to customers, as our Khed facility has limited scope for new lines. This allows us to handle increased demand effectively, and while there are challenges, we have confidence based on our commissioning experience and the strategic nature of our investments.

2. Question: "So just trying to look at the execution for this? What kind of growth can we assume across these plants in the next couple of years in terms of the ramping up of this INR1,800 crores of capex?"

   Answer: The new plants span multiple businesses, each with dedicated teams ensuring focused execution. Growth expectations are robust, supported by market demand and capacity expansions. Notably, we have new strategic business wins like the INR 450 crores deal, highlighting our expectations for growth aligned with market trends.

3. Question: "If you can help us understand what kind of quantum was that? And commodity inflation, how much of that it is?"

   Answer: The Q4 margin was affected by various factors, including price settlements. While it's challenging to quantify the exact impact, we expect some inflation pressure due to recent geopolitical events. We're discussing with customers to adjust price settlements more frequently to address these cost increases, alongside labor cost inflation of about 35% in some regions.

4. Question: "Would the gross turnover be 2x of the capex? Is that a right number?"

   Answer: Initially, we expect a higher revenue multiple as we localize components gradually. Over time, we anticipate that revenue will exceed 2x our capex as efficiency increases and our customer base grows with additional business wins, especially in the electric vehicle segment.

5. Question: "What could be the impact in terms of the fact that labor cost increase?"

   Answer: Labor cost increases are significant, pegged at hundreds of crores across impacted states like Haryana and Gujarat. We see this as a shared challenge with our customers and are actively working to find solutions that maintain our competitiveness without compromising margins.

6. Question: "Can you approximately indicate for the 2-wheeler and 4-wheeler industry, how much would be the alloy wheel penetration currently?"

   Answer: Currently, the alloy wheel penetration is about 70% for 2-wheelers and around 40% for 4-wheelers. Our focus remains on expanding this penetration through strategic partnerships and enhanced product offerings in response to market demands.

7. Question: "What's the percentage of exports now, and where do you see that in a couple of years?"

   Answer: Currently, our exports amount to roughly INR 600 crores, which we expect to increase significantly beyond INR 1,500 crores in the next few years, driven by new business wins and ramping up production capacity.

8. Question: "What do you see the revenue potential for both plants together?"

   Answer: Combined, the revenue potential from the INR 400 crore and INR 550 crore plants, along with additional capex for casting, indicates a projected revenue of over INR 2,500 crores, potentially even reaching INR 3,000 crores at peak capacity.

9. Question: "On the infotainment side, how do you see this business changing in the next 3 to 5 years?"

   Answer: We expect the infotainment business to grow significantly, potentially exceeding INR 1,500 crores by FY30, considering new business orders and expected ramp-ups in production with existing clients. This growth is supported by our focus on innovation and developing competitive localized products.

10. Question: "Is this INR2,500 crores fundraising an immediate plan?"

    Answer: This funding is an enabling resolution we've taken annually to provide flexibility for various instruments like NCDs and borrowings. Currently, there's no specific fundraising plan, but we're prepared should the need arise.