Motilal Oswal has started coverage on auto component maker Uno Minda with a target price of INR 1,406. The brokerage is optimistic about the company's long-term growth driven by capacity expansion and the shift toward electric vehicles, though it notes recent margin pressure from rising input costs.
Motilal Oswal has initiated coverage on Uno Minda with a target price of INR 1,406 per share, reflecting a positive outlook on the company’s growth trajectory through fiscal year 2028. The brokerage is betting on Uno Minda’s ability to capitalize on the increasing adoption of electric vehicles and the industry-wide move toward higher-value automotive components.
Q1 FY27 Performance and Margin Pressure
In its first-quarter results for fiscal year 2027, Uno Minda reported strong top-line numbers, with consolidated revenue rising 26% year-on-year to INR 5,557 crore. Profit after tax also saw a healthy increase, growing 24% to reach INR 296 crore.
Despite the revenue growth, the company faced some headwinds in profitability. The EBITDA margin contracted by 180 basis points year-on-year to 10.3%. This decline was primarily attributed to inflation in commodity prices—such as aluminum—and higher wage costs. This is a critical area for investors to track, as the company’s ability to protect its margins in the face of fluctuating raw material prices will be essential for meeting its future profit targets.
Expansion Plans and Execution Risk
The brokerage’s positive stance is largely tied to Uno Minda’s aggressive capital spending. The company is currently executing 11 capacity expansion projects, including a new INR 320 crore greenfield facility dedicated to seating systems, which is expected to be commissioned by the fourth quarter of fiscal year 2028.
While this expansion is intended to drive a projected 19% compound annual growth rate in revenue through 2028, it introduces operational challenges. Managing multiple large-scale projects at once carries execution risk. If these projects face delays or if demand for passenger vehicles and two-wheelers slows down, the company’s return on capital could be impacted. Furthermore, the automotive component sector is cyclical, meaning Uno Minda's performance is closely linked to the broader health of the Indian automobile market.
What Investors Should Monitor
The valuation provided by the brokerage is based on 45 times the estimated earnings per share for fiscal year 2028, signaling that the current stock price factors in expected future growth. For shareholders and potential investors, the key monitorable will be the actual commissioning timeline of the 11 ongoing projects. Additionally, market participants will likely watch for any signs of margin improvement in the coming quarters, as this will demonstrate the company's ability to pass on cost increases to original equipment manufacturers.