Motilal Oswal initiates coverage on this auto component maker with a 25% upside. 4 reasons why

Shares of Uno Minda, a global manufacturer and supplier of auto components, gained over 3% to Rs 1,169 on the BSE on Thursday after Motilal Oswal initiated coverage with a Buy call and a target price of Rs 1,406, an upside of 25% from current market levels.

The domestic brokerage said the company is emerging as one of the key beneficiaries of structural growth trends in the industry, such as premiumization and EV transition, which are driving a steady rise in content per vehicle (CPV) for Uno Minda over the years.Here are 4 reasons behind the bullish call1.) Strong portfolio mix - Uno Minda has a well-diversified and fuel-agnostic product portfolio with exposure across all major automobile segments.

In FY26, switches contributed 25% of revenue, followed by lighting at 22%, castings at 19%, seating at 7%, green mobility at 7% and other products at 19%.

The "others" segment includes high-growth categories such as acoustics, sensors and advanced driver assistance systems (ADAS).

Passenger vehicles accounted for 48% of the company's revenue mix, while two-wheelers contributed 42%.

The remaining revenue came from three-wheelers (3%), commercial vehicles (4%) and off-the-road (OTR) vehicles (3%).

2.) Premiumization boost - Analysts say the Indian automobile industry has witnessed a clear premiumisation trend across key vehicle segments over the years.

In the passenger vehicle segment, the share of utility vehicles (UVs) has increased to 67% in FY26 from 21% in FY16.

In motorcycles, the share of models with engine capacity of 125cc and above has risen to 55% in FY26 from around 36% in FY16.Also read: Uno Minda to invest Rs 320 cr in new plant for four-wheeler PV seating systemsThe brokerage noted that consumers are increasingly seeking feature-rich vehicles across segments, including entry-level cars.

At the same time, stricter safety and emission regulations are driving higher content per vehicle (CPV).Motilal Oswal also highlighted the growing adoption of electric vehicles across segments, supported by the government's continued focus on promoting green mobility.3.) Partnerships, R&D ability bodes well - The company has built a strong innovation ecosystem with 37 R&D centres, supported by global technology partnerships.

The company has been granted 292 patents and has registered 577 designs, while its global R&D network remains aligned with international technological advancements and industry best practices.The brokerage believes this combination of strategic partnerships and in-house engineering capabilities is a key driver of Uno Minda's ability to deliver structurally higher growth than the broader auto industry while creating capabilities that are difficult to replicate organically.Motilal Oswal also noted that the management's long-term goal of growing at 1.4x to 1.5x the underlying industry growth appears credible, backed by the company's consistent track record of outperforming the industry over the years.4.) FY27 to be transformational - Uno Minda expects FY27 to be a defining year for growth, with seven of its 11 new projects either becoming operational or entering the ramp-up phase during the year.

This comes in addition to the commercialisation of two new plants in the fourth quarter of FY26.The brokerage expects the company to deliver a compound annual growth rate (CAGR) of 19% in revenue, 20% in EBITDA and 23% in profit after tax (PAT) over FY26-28.Motilal Oswal also expects Uno Minda to remain free cash flow (FCF) positive over FY26-28 despite higher capital expenditure.

Consequently, it estimates the company's net debt will decline to Rs 1,780 crore by FY28 from Rs 2,150 crore in FY26.

The brokerage added that returns are likely to improve in FY28 as the newly created capacities are fully ramped up.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own.

These do not represent the views of The Economic Times) ...