Minda Corporation Limited (MINDACORP.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Minda Corporation Limited Q2 and H1 FY '26 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ronak Mehta from ICICI Securities Limited. Thank you, and over to you, Mr. Mehta.

Thank you, Vikra. Good evening, everyone. On behalf of ICICI Securities, I would like to welcome you all to Q2 FY '26 earnings conference call of Minda Corporation Limited. Today, we have with us from the management team, Mr. Aakash Minda, Executive Director; Mr. Ajay Agarwal, President, Finance and Strategy; and Mr. Nitesh Jain, Lead Investor Relations. I would like to thank the management for giving us this opportunity. I will now hand over the call to the management for their opening remarks, post which we will open the floor for Q&A. Over to you, sir.

Yes. Good afternoon. Am I audible?

Yes, sir. You are audible.

So good afternoon, everybody, and thank you very much, Ronak from ICICI Securities, for hosting our call. Today, I'm going to share and give some highlights about the Minda Corporation. So good afternoon, everybody, and welcome to the quarter 2 and H1 FY '26 earnings conference call of Minda Corporation Limited. I hope all of you are doing very well. It is our pleasure to connect with you today and present our performance for the quarter, along with the key developments across the business. Speaking about the automotive industry, in quarter 2 FY '26, India's auto sector maintained a positive trajectory supported by favorable macros, improved consumer sentiment and the recent GST rate reduction that enhanced the affordability. The 2-wheeler segment witnessed strong growth, led by resilient rural demand, improved financing access and increased premiumization. In the passenger vehicle, sustained steady demand with utility vehicle continue to dominate the mix. Commercial vehicle segment reported broad-based growth across MHCV and LCV categories, driven by strong freight activity, improved intracity logistics, and recovery in infrastructure and construction sectors. The tractor segment also continued its momentum, supported by healthy kharif output and rural income recovery. Overall, the industry entered the second half of FY '26 on an optimistic note with festive demand and GST 2.0 reforms expected to sustain growth. In addition, the government's continued Make in India focus is driving localization and self-resilience across the automotive value chain. These policies align well with the Minda Corporation strategy as we scale domestic manufacturing, localization of key components and strengthen our supply chain to serve both domestic and global OEMs. Now reflecting on the company's performance. The company maintained its strong growth momentum this quarter, surpassing consensus estimates, achieving its highest ever quarterly revenue of INR 1,535 crore, a robust growth of 19% on a year-on-year basis. This performance was fueled by sustained demand across key vehicle segments, increase in share of businesses, and content per vehicle and strong traction in EV and premium product categories. The company reported its highest ever EBITDA of INR 178 crores, representing a growth of about 21.4% on year-on-year basis with a highest ever EBITDA margin of 11.6%. The profit after tax reached INR 85 crores, a growth of 14% on Y-o-Y basis, supported by improved operational efficiencies and a favorable product mix. Minda Corporation have outperformed the industry trends across business segments with notable success in the wiring harness division and instrument cluster division. On our associate company Flash Electronics, Flash Electronics has reported a strong performance in quarter 2 FY '26 with a revenue of INR 446 crores with an EBITDA of INR 72 crores with an EBITDA margin of 16.1%. The collaboration has strengthened our presence in high-growth domains such as EV power electronics, traction motors, controllers and vehicle control units. This collaboration continues to deliver operational synergies and will play a pivotal role in achieving our growth roadmap. In quarter 2 FY '26, we also hosted our Investor Day in Pune, where we presented Minda Corporation's technological capabilities, strategic priorities and most important, our long-term Vision 2030, which is built around key 5 pillars that define our growth roadmap and guide our strategic direction. Our performance continues to be guided by the key pillars of growth, which are: one, investment in existing businesses; two, new market export focus; three, premiumization of existing products; fourth, new product launches; and fifth, investment into R&D. Looking ahead, we remain committed to executing our strategic priorities with continued focus on enhancing our system solution offering, strengthening customer relationships and investing in new technologies. Our emphasis on operational excellence will also play a critical role in driving the growth in FY '26 and beyond. Our key focus remains on capital allocation. We are committed to expanding our presence in the EV market, advancing our R&D capabilities and building strategic partnerships. Now with that, I would like to invite Mr. Ajay Agarwal to take you through the company's presentation and key highlights for the quarter. Over to you, Ajay. Thank you.

Thank you, Aakash. Once again, good evening to everyone. I'm on Slide #2. I'm hoping that the slides have reached all of you and you have a copy of it. Slide #2 gives you a glance of Minda Corporation. Our group revenue for FY '25 was INR 7,472 crores and consol revenue was INR 5,056 crores. We have 32 manufacturing plants, over 18,000 workforce across 32 plants and various offices. We have filed for 315 patents. Out of that, 143 patents have already been granted to the company. On the left bottom, these are some of the significant partners we have onboarded over the last several years. In this calendar year, many of you know, we have done -- we have acquired 46% -- 49% of Flash in January of '25. Moving to the next slide, Slide #3. It gives you an overview of Indian automotive industry performance for quarter 2. Aakash did touch upon how the growth has been for the auto industry. If you look at -- the industry grew at about 10.1% year-on-year. On a quarter-on-quarter basis, it grew at 15.6%, the noticeable growth we have seen both in 2-wheeler segment, in 3-wheeler segment as well as in tractor segment. Passenger vehicle also grew, but the growth was quite timid. And clearly, the growth which we saw in Q2 was largely driven by some of the policy announcement carried out by the central government in September. Moving to Slide #4. It gives you a brief overview how has been our Q2 and some of the significant developments in Q2. And on the right-hand side, it talks about what has been the significant development from a 6-month H1 '26 perspective. The company had a highest ever revenue clocked at INR 1,535 crore, registering a growth of 19% year-on-year. The EBITDA margin stood at 11.6% for Q2, registering a growth of 22 bps year-on-year. This quarter, we registered a lifetime order book of about INR 2,000 crore, which constitute export about 15%. We have been significantly waiting for our sunroof order. I'm happy to report to all of you that we have secured our first sunroof order from a leading OEM for their upcoming vehicle launch, and we'll give you more details as we come closer to the production. And in this quarter, we have filed 6 new patent. As I said, up to date we have filed 315 patents. Out of that, 143 patents have already been granted. From a H1 perspective, we registered a growth of 18% despite macro and microeconomic challenges, which we are seeing in the automotive industry. EBITDA margin stood at 11.4%, registering a growth of 23 bps year-on-year and total lifetime order book exceeded INR 3,600 crores for the H1. Our new partnership with Toyodenso for switches, we have got some interesting orders from leading OEMs. And there also, we will give you more details as we come closer to the production. And in the first year, we have filed 12 patents out of 315, which we talked about. Moving to Slide #5. These are some of the new products portfolio we have added in the last 6 months and particularly in quarter 2. High-voltage EV wiring and harness order we have received from a leading OEM, and this is a new business, which we are going to start in Minda Corporation. TFT cluster also we have won from a leading OEM for their upcoming model launch. Sunroof, I did touch upon that. That order has also been received and SOP is planned for Q1 of FY '27. Like I said, our Toyodenso joint venture, we have won a significant order for the switches from the leading OEM, and we plan to commence our operation sometime Q4 of FY '27. Moving to Slide #6, giving you some snippets of our performance in revenue for Q2. Our revenue stood at INR 1,535 crores, registering a growth of 19% year-on-year. EBITDA stood at INR 178 crores, registering a growth of 21% over Q2 of FY '25. And PAT also saw a significant growth from INR 74 crores to INR 85 crores in this quarter. From a half year perspective, revenue saw a growth of 18%, EBITDA saw a growth of 20% and PAT saw a growth of 8%. Moving to the Slide #7. From a business segment and business vertical perspective, Mechatronics and aftermarket saw a -- registered a strong growth in domestic 2-wheeler segment, while we saw a little bit of setback in export and a little bit of slowdown in ASEAN market. But despite that, the business grew by around 12%. And from a Information and Connected System perspective, the business growth was registered about 26%, which includes our Minda instrument and wiring harness business. Moving to the next slide, Slide #8. From a product portfolio perspective on the overall revenue segment, wiring harness registered a overall 30% contributed by wiring harness business. Vehicle access contributed 22%, die casting contributed 16% and cluster business contributed 17%. From a mobility perspective, 2-wheeler and 3-wheeler contributed about 45% of our total revenue, commercial vehicle contributed 29% of the revenue, passenger vehicle contributed 15% and aftermarket contributed 11% in Q2 of FY '27. I briefly touched upon -- moving to Slide #9. I briefly touched upon our recent partnership with Flash. They also did quite well, both from a Q2 as well as half yearly perspective, despite having some challenges in terms of magnet. And they saw a little bit of downtrend from a OEM perspective. But despite that, the performance is quite heartening to see. Their revenue stood at around INR 446 crores for the quarter and for half year, it stood at INR 822 crores. The EBITDA margin stood at 16.1% and PAT margin stood at 6.8%. From a half year perspective, it is INR 131 crore the EBITDA and the PAT margin is INR 52 crore with 6.3%. Moving to the next slide, Slide #10. This gives you a overview of where our debt position stands. Our net debt is INR 1,165 crores and net debt to net worth -- net debt-to-equity ratio is about 0.5, and our rating stands at AA stable from India rating. And for CRISIL, it is AA- with positive outlook. Moving to the next slide. Aakash did touch upon some of the strategic priorities when we unveiled our vision for FY '30. I'll not go deeper into many of those, but suffice to say, for the quarter -- for the half year ending FY '26, the company has invested INR 220 crores. We have planned expenditure of INR 2,000 crore over the next 4.5 to 5 years. Moving to the Slide #13. It gives you where all the investment will be made the -- across the vertical, including die casting SMAB (sic) [ SMAD ], in our Minda Toyodenso joint venture, wiring harness division as well as Minda instrument. Some of the product launch, I have already spoken -- I'm on Slide #15 -- whether it is sunroof, whether it is switches and the high-voltage wiring harness product. I'm now on Slide #21. As all of you know, we have made significant investment in our R&D center over the last several years, and we continue to -- we will continue to invest because it's being our strategic priority and it is yielding rich dividend to us. Thus far, we have been spending about 4% to 4.5% of our revenue in R&D. Going forward, that amount might stand at around 3%, 3.5% in R&D because most of the CapEx has already been carried out, and we don't expect to incur too much of CapEx around that. So with this, I'll hand it over to the operator for the Q&A, please.

[Operator Instructions] The first question is from the line of Raghunandhan N.L. from Nuvama Research.

Congratulations on extremely strong numbers. Sir, my question was on the wiring harness space. In wiring harness, there is a significant outperformance in comparison to industry growth. Can you indicate what would be the current market share in 2-wheeler and CV wiring harness and whether we have gained market share in comparison to last year?

Yes. Raghu, thank you so much for your question. In wiring harness division, particularly as we have shown, our dependence continues to be more on the non-passenger vehicle segment. However, we have made the first breakthrough on the high-voltage side in the passenger vehicle at Minda Corporation. On the market share perspective, it is a little fragmented, basis on the different segments. So when it comes to 2-wheelers and commercial vehicles and off-road, we are north of 30% in each of these segments.

Got it, sir. And you alluded to the PV order win. And in the opening remarks also, Ajay sir mentioned that this is a new business. Can you elaborate a little bit more what would be the size of the order? How do you see your position in the PV business to shape up in the coming quarters and years? How do you plan to take it forward?

So sorry, your question is [ about ] particular business or all the 4 businesses that we have showcased?

No, no. In wiring harness only, sir. In wiring harness, you've got the order for the PV wiring harness. So this order is a new order. So how do you see the size of the order? How do you see the growth in wiring harness segment, especially for the PV space?

Yes. So currently, high-voltage wiring harnesses and cables are imported into India. And this is in our drive to move forward for the localization as well as increased content per vehicle. Passenger vehicle business that we have got is from an international OEM based in India, and they are one of the largest EV manufacturers of passenger vehicles in India. So yes, our focus going forward is how we can capture this segment of the industry as well. So yes, this is the first breakthrough that we have got from the passenger vehicle side, and we are now localizing the components through our Sanco partnership as well as how we can penetrate further by way of localization of the other system solutions offering. Yes.

Got it, sir. Another question on wiring harness before I fall back to the queue. Can you indicate how many customers you are servicing relating to the EVs in wiring harness? Or can you mention the share of EV in revenue for this division?

We are serving multiple customers and largely they come from the 2-wheeler and 3-wheeler. And in the 4-wheeler, we have just now added our first customer. But particularly when it comes to the wiring harness side, typically our revenue from the EV stands in more excess of 3-digit numbers.

The next question is from the line of Jay Kale from Elara Capital.

Congrats on a great set of numbers. My first question is regarding your smart key solution. You talked about a lot of adoption for the ICE customers as well. If you could just speak a little bit about the journey over there. Where did you get such…

Sorry to interrupt, Jay. Your voice is breaking. Can you just check your network connection?

Is this better? Hello.

Could you please rejoin the queue?

Hello. Hello. Is this better?

Sir, your voice is breaking you have to rejoin the queue. Check your network connection and join back the queue. Thank you. The next question is from the line of Mitul Shah from DAM Capital.

Congratulations for a very strong performance in a tough environment. Sir, first question is on Flash. If you can give slightly more details in terms of how the business revenue breakup in terms of the EV versus non-EV. And considering the current scenario of the rare earth magnet issue, how one should look at what's the outlook from next 2, 3 quarters point of view? And what is the strategy there?

See, from an EV and non-EV perspective, their EV contribution to the revenue stands about 23-, 24-odd percentage. And we believe that it was a issue of Q2. That problem has been relatively solved between most of the OEMs, Tier 1s as well as the reconciliation which took place between the several governments. I don't believe that -- we don't believe that we would have that issue for Q3, Q4 and onwards. Alongside of that, most of the Tier 1s, including Flash, has been significantly spending money to find solution around rare earth magnets. And I think in times to come, we will be in a position to discuss more in detail what kind of product has been launched to solve permanently the rare earth issue.

So Flash has already developed the ferrite motors for all of our customers. And also the tech center from Poland has already developed magnet-less motors. Now they are under current testing validation at our internal facilities, and then they will be offered to the customers.

Okay, sir. Second question is on sunroof SOPs we are starting in Q1 '27. How one should look at ramp up throughout '27? And if you can throw some light on '28 or these initial orders, first order win is very small or can we consider meaningful? If you can give some detail on this sunroof business.

Yes. So it is a phase-wise approach. And this business is going to ramp up throughout '27, and then, of course, probably achieving the peak value in FY '28. That is how the typical launch of a new product is. And our customer who is launching this product is a new platform or a new product. So it is -- that's one. And secondly, it is a sizable order, if I can say. And yes, so we are going to see the ramp up. However, I would like to definitely point out that this joint venture is a 50%-50% between Minda Corporation and HCMF.

Yes. Sir, lastly on the revenue segment-wise in terms of the -- CV revenue has also reported decent revenues. So can you give more detail whether it's market share gain or any content addition or increasing the price of the product or how one should look at? Because overall underlying industry has not done so great, and we have done much better.

Yes. So Mitul, these, again, focus on the base objectives of the organization that we continue to do. So again it's a mix of market share. It's a mix of adding new customers -- new products, sorry, and also adding the premiumization of the products from the clusters or the wiring harness perspective.

The next question is from the line of Jay Kale from Elara Capital.

Yes. Am I audible now?

Yes, please.

Yes. So my first question was regarding smart key solutions. If you could just give us a little more about how the acceptance for your ICE customers has been for this product? What is the contribution of smart key solutions currently? And how are you seeing that over the next 2 to 3 years?

So Jay, thank you for your question. The penetration of smart keys into the 2-wheeler is going as per our plan. As we understand and as we've shared before, the penetration currently is somewhere about 3% to 5%. And by 2030, our target is to take it to somewhere about 25% to 30%. Yes, it is -- there are a lot of factors that are playing in, and we are seeing many customers, whether Japanese or Indian 2-wheeler OEMs, launching these products in ICE as well as EV vehicles. Particularly when it comes to the percentage of penetration, it is again hovering around a similar number, which is close to about 5% to 6%, yes.

Understood. And just on your export side, if you could just highlight how you see your export orders? Any significant wins over there? And [indiscernible] export has underperformed the domestic growth. Are we seeing any change of fortunes on that side?

Yes. Our focus on export continues as we have shown in our Vision 2030 as well. So the order win continues to be from the die casting business, the wiring harness businesses, and now moving forward is from the instrument cluster businesses as well. So these will be the areas of focus when it comes to the export orders. And as we mentioned, the export orders continue to be there, but the overall current business that we are exporting, particularly on our Mechatronics business side, are underperforming due to the overall recreational vehicle slowdown that we can see across the 2 geographies in Europe and America.

The next question is from the line of Jyoti Singh from Arihant Capital Markets Limited.

Congratulation on the good set of number. So my question is on the die casting and plastic side. So what proportion of die casting revenue comes from EV application, like motor housing and battery trades versus IC component? And another, with 2 new die casting plant that under construction, so what kind of utilization level that we are expected at SOP? And what incremental revenue capacity are we planning to add? I will add more.