Minda Corp share price hits record high; gains 74% in about 1 year; is the stock buy-worthy? Experts weigh in

Estimated read time 18 min read

Minda Corporation’s share price has been on a strong uptrend over the last year. It hit its 52-week low of 277.45 on July 4 last year. Considering today’s high, the stock has gained over 74 per cent in about a year.

On the valuation front, the stock’s current price-to-earnings ratio (PE ratio), as per BSE, is 57.87, which is above its trailing 12-month PE ratio of 50.

As Mint reported earlier, Minda Corporation posted a 27 per cent year-on-year (YoY) rise in its profit after tax to 71 crore for the March quarter of FY24. Its operating revenue increased 13 per cent YoY to 1,215 crore in the fourth quarter as against 1,075 crore in the same period last year.

Experts expect the auto component maker company to benefit from the trend towards higher-value products, the growth of electric vehicles, and increased business from car and commercial vehicle manufacturers. The company has a strong order book, a significant global presence, and a significant client base across different market segments.

Mint spoke to several analysts to get their insights about the stock. Should one buy this stock at the current juncture? Here’s what they said:

Fundamental views

Amit Goel, Co-Founder & Chief Global Strategist, Pace 360

Minda Corporation has shown strong revenue and profit growth in recent years.

Sales have grown at a 17.91 per cent CAGR over the past three years, and profit has grown at a 44.19 per cent CAGR over the same period.

The company maintains profitability margins with an EBITDA margin of 11.44 per cent and a return on equity (ROE) of 12.74 per cent.

The current PE ratio is significantly high, suggesting the stock is overvalued. Similarly, the price-to-book ratio is indicating that the stock might be expensive compared to its book value.

“Valuations are expensive for corporate earnings growth. Indian markets are extremely overvalued and overstretched. We recommend that investors sell the stock and book profits,” said Goel.

Parth Shah, Research Analyst,StoxBox

“We remain constructive on Minda Corp.’s fundamentals and recommend investors hold the stock from a medium to long-term perspective,” said Shah.

The company is a close proxy to the two-wheeler space (47 per cent of FY24 revenues), which is expected to do well as rural demand gains traction.

The company’s diversified product portfolio, along with its presence in other automotive segments (PVs and CVs), reduces the overall business performance risk.

The company’s strong order book, EV-agnostic products, and increasing content per vehicle position it well in revenue visibility.

“The company’s strong financial performance (all-time high revenue, EBITDA, and margin in FY24) and balance sheet strength make us optimistic about improving its return ratios in the future,” said Shah.

Technical views

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers

Over the past three to four months, Minda Corp’s stock has traded within a consolidation range of approximately 388 to 450.

Recently, it has broken out of this range on a monthly scale and is now trading around the 470 mark.

This breakout signifies a potential shift in momentum, indicating that the stock may be poised for further upward movement.

Supporting this bullish outlook, the monthly Relative Strength Index (RSI) is in the overbought territory, often suggesting that strong buying interest could continue driving the stock higher.

“Based on this analysis, we recommend taking a long position in MindaCorp within the 465-470 price range. The target for this trade is set at 525. To manage risk, a stop-loss should be placed at 440 on a daily close basis,” said Patel.

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Minda Corp technical chart (Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers)

Mandar Bhojane, Equity Research Analyst, Choice Broking

Minda Corp stock has demonstrated a strong rally from lower levels, forming a pattern of higher highs and higher lows, which indicates a robust uptrend.

“The stock has found support around the 450 and 440 levels, establishing these as reliable support zones. As the price closed above the 474 level, it could rise further to 520,” said Bhojane.

The Relative Strength Index (RSI) is at 66, indicating potential upside.

Additionally, the Stochastic RSI shows a positive crossover, further confirming the bullish sentiment.

Notably, the stock trades above all significant moving averages, highlighting its overall strength.

“Considering these technical indicators and the current market conditions, it appears to be an opportune moment to consider buying the stock at the current market price. A reasonable target for this trade could be 520, with a recommended stop loss at 444 to manage potential risks,” said Bhojane.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

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Published: 18 Jun 2024, 05:56 PM IST

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