This stock turned Rs 1 lakh into more than Rs 5 lakh in just two years

The stock of auto components manufacturer Minda Industries has turned multibagger during the last two years.

The firm which has clients such as Bajaj Auto, BMW, Honda, Hero, KTM, Royal Enfield, TVS , Suzuki and Yamaha has seen its stock rise over 552% since May 6, 2016. On May 6, the stock stood at Rs 200. Currently, the stock is trading around 1304 level on the BSE. Anyone who had invested Rs 1,00,000 into the stock two years ago must be sitting on corpus worth Rs 5,52,000 currently. The stock has lost 2.53% since the beginning of this year. During the last one year, the stock has gained 101.43%.

The Minda Group announced consolidation of Minda Industries in early 2016 which was to be completed by March 2018. The stock increased more than five fold during this period which can be attributed to the consolidation process leading to cost cutting and economies of scale. This led to an improvement in the earnings of the firm.

Ashutosh Tiwari, head of research at Equirus Securities said they have delivered strong earnings over last two years, their FY18 profit was 2.5 times FY16 profit after tax (PAT). They have consolidated most of the Group companies in listed entity.

The firm reported a 53% rise (yoy) in consolidated revenue at Rs 1,371 crore, 20% higher than consensus estimate of Rs 1,144 cr in the last quarter. It reported profit after tax for Q4 which rose 141% year on year to Rs 135 crore. Due to the cost control process, earnings before interest, tax and depreciation (EBITDA) rose 62% yoy to Rs 170 crore, while EBITDA margin expanded 67 bps y-o-y to 12.4%.

In Q3 of 2018, consolidated revenue for Minda Industries was 26% y-o-y higher at Rs 1,056 crore, lower than consensus estimate of Rs 1,085 crore. EBITDA was 27% y-o-y higher at Rs 126 crore, in-line with consensus estimate. EBITDA margin rose 11 bps yoy to 12%. Net profit for the company rose 37% yoy to Rs 59 crore. This was lower than consensus estimate of Rs 63 crore.

"Minda Group was under the phase of consolidation by merging its different businesses into its main entity of Minda Industries Ltd (MIL). During the last three years, the revenue of MIL has doubled to Rs 4,471 crore while dilution in equity was only 9%. Along with consolidation and inorganic growth enabled the company to expand its core business, leading to strong earnings growth and re-rating in valuation. Foraying into new products also helped to garner higher contribution from key existing and new clients. Consolidated revenue and PAT grew by 26%/70% CAGR during FY15-18 respectively. We forecast revenue and PAT to grow at 19% and 23% over FY18-20E. Valuation has rerated from an average P/E of 14x to 30x over the last three years and we believe that this premium valuation is likely to sustain," according to Geojit research team.