(Bloomberg) -- Minda Industries Ltd., the Indian vehicle-component maker that’s seen its stock climb the most among peers in the past five years, is expected to benefit from tightening safety regulations in one of the world’s largest automobile markets.
Shares of the components manufacturer, which supplies to companies including BMW and local car market leader Maruti Suzuki India Ltd., have climbed 114 percent in the past year and offered annualized returns of 107 percent over five years. Safety norms that go into effect next year will boost the company’s performance, said Ashutosh Tiwari of Equirus Securities Pvt. Ltd., who is the top-ranked analyst for Minda, according to data compiled by Bloomberg.
Safety equipment including airbags, reverse parking sensors and speed warnings will become mandatory in cars sold from July 1 as India seeks to reduce traffic fatalities. Minda has entered five joint ventures in as many years, giving it exposure to components such as advanced driver assistance systems, airbags and alloy wheels -- positioning itself to benefit from the shift and an emerging appetite for high-end frills.
“We have added new capacities and products to our portfolio that have now matured,” helping improve revenue and profit, Minda Chief Financial Officer Sudhir Jain said by phone.
Click here for more on Minda’s outlook for 20% earnings growth
Earnings should grow about 20 percent this financial year given Minda’s product range, expansion into alloy wheels and ongoing acquisition of Toyoda Gosei Minda India Pvt., Jain said in a May interview with Bloomberg Quint.
Return on equity, a measure of how well shareholder money is reinvested, was 25.7 percent for Minda, the highest among its peers, according to data compiled by Bloomberg.
Domestic production of auto components is expected to grow at a compounded annual rate of as much as 13 percent in the five years through financial year 2022, according to an April report from Crisil, the local ratings unit of S&P Global.
Demand for high-end products is expanding and Minda’s partnerships allow it to manufacture locally components that were once imported, said Mukesh Saraf, manager at Spark Capital Advisors. “They are producing more premium products and creating a niche,” he said.
Minda is also exploring opportunities in the electric vehicle space as the government pursues Prime Minister Narendra Modi’s ambition to significantly increase the adoption of battery-powered cars.
“EV is a reality in India,” said Minda’s Jain. The company is in touch with original equipment manufacturers for possible EV-compatible systems and is evaluating existing products to see how they will fit into the market, he said.
©2018 Bloomberg L.P.