Fundamental Report Uniparts India Limited

Manufacturing, Warehousing and Distribution Facilities:

3PL Market – World Market for 3PL was USD 360-370 million in 2021 and is expected to grow at 6-8% between 2021 and 2026 encouraged by robust growth in tractor production volumes in North America, India, and Europe. A major driver of 3PL demand is tractors and the demand for 3PL is set to grow at a steady pace supported by:

1. Growth in the global tractor production
2. High level of farm mechanization and labour shortage
3. Focus on innovation and new technologies
4. Upgradation to higher Horse Power (HP) tractors by farmers

PMP Market – Global PMP market was USD 648 million in 2021, with more than 80% demand from four key geographies China, Japan, Europe, and North America. The demand for PMP products is expected to grow at a healthy CAGR of 6% – 8% between 2021 and 2026, supported by strong volume growth in construction equipment production in key markets such as the USA, Japan, and Europe. India will also contribute to this growth led by increased infrastructure projects.

Key Triggers/Highlights:

Leading presence in Global Off-Highway Market

UIL operates in more than 25 countries worldwide and is a well-known supplier of engineered systems and components to the Off-Highway market. As of FY22, it commands 16.7% market share in the global 3PL segment and 5.9% market share in the global PMP segment in terms of value in the Construction, Forestry and Mining segments.

Engineering driven, vertically integrated precision solution provider

The company has evolved from a component supplier to a provider of complete assemblies of precision engineered products which allow the company to offer integrated system solutions to meet its customer requirements and move up the value chain.

 

Long-term relationship with key global customers including OEMs

Company’s key global customers includes Tractors and Farm Equipment Limited (“TAFE”), Doosan Bobcat North America (“Bobcat”), Claas Agricultural Machinery Private Limited (“Claas Tractors”), Yanmar Global Expert Co. Ltd (“Yanmar”) and LS Mtron Limited among others. Four of company’s top five customers (based on revenue contribution during FY21) have been its customers for over 10 years. TAFE and Kramp are some of the customers with whom company has relationships for over 15 years. In the farm machinery or tractor space, UIL count all top 10 players as its customers while in the CFM domain, it counts 5 out of top 10 players at its customers. Its key customers in the farm machinery space in the domestic market include Mahindra & Mahindra, International Tractors (ITL), TAFE, Kubota-Escorts among others.

 

Focus on higher value addition products and Margin improvement

Company intend to continue to increase the margin accretive warehousing sales among other sales model mix and also intend to further expand its product portfolio with solutions for adjacent vehicle and equipment types such as utility task vehicles and all-terrain vehicles as well as focus on PMP products with a technology focus, such as, plungers and transmission components.

Consolidated Financials:

Quarterly Performance:

Extract of Q2FY23 Earnings:

• UIL generated highest ever revenue from operations of Rs.1037 cr. and Profit after Tax of Rs.159 cr. in the first nine months of FY23.

• Company also generated highest ever Cash flow from Operations of Rs.144 cr. in the first nine months of the FY23.

• Revenue from Operations of the company grew by more than 10% YoY in the Q3FY23 and 17.8% YoY for the 9MFY23; while Net Profits grew by 28% YoY in the Q3FY23 and 29% YoY for 9MFY23.

• Company’s operating profits grew by 18% YoY in the quarter led by significant decrease in the material cost. EBITDA margin of the company improved sequentially as well as yearly by 170 bps and stands at 23.8% in the quarter.

• Commenting on the latest results, management said that company’s commitment to its customers has only grown stronger over the years, and is continuously expanding its client base and product offerings in order to be the partner of choice for the valued customers. Management also believe the company is well set for exciting future ahead with engineering and design capabilities and Leading market presence in the off-highway systems segment.

 

Profit and Loss Statement:

Balance Sheet:         

 

Cash Flow Statement:

Top Shareholders of UIL as of 31^st December, 2022:

 

Promoters	% Holding	FII	% Holding
Gurdeep  Soni	19.93%	Bnp Paribas Arbitrage – Odi	1.25%
The Paramjit Soni 2018 CG-NG Nevada Trust (Through its Trustee Peak Trust Company-Nv)	14.17%	The Nomura Trust And Banking Co., Ltd As The Trustee Of Nomura India Stock Mother Fund	1.15%
The Karan Soni 2018 CG-NG Nevada Trust (Through its Trustee Peak Trust Company-Nv)	9.08%	Icg Q Limited	1.12%
The Meher Soni 2018 CG-NG Nevada Trust (Through its Trustee Peak Trust Company-Nv)	9.08%
Angad Soni	4.43%

 

Peer Comparison:

 

UIL has no listed peer that operates in the similar business segments in which the company operates.  However we can compare it to the other listed peers which have similar exposure to certain segments or use the similar nature of manufacturing process for their products.

 

Comparison of key parameters indicators for Fiscal 2022 with listed industry peers:

Outlook:

UIL is well-positioned with a significant market share in the global off-highway market and it is going to be benefitted further with the increasing mechanization in the agriculture, mining and forestry sectors globally. The strong distribution channel in the OEM and aftermarket segments will help the company to increase its customer base. Also company’s continuous focus on the new products and geographies along with leveraging its global business model will help it to maintain long term relationship with its clients. The operating environment in which the company is working shows signs of recovery be it Off-Highway vehicle industry growth or ease in global supply chain issues or cooling off in the commodity prices. The company has delivered strong financial performance over the years with Revenue CAGR of ~11% and PAT CAGR of 38.6% from FY20-FY22. It has delivered the EPS of Rs.36.07 for the nine months of FY23, and we expect it to exit the FY23 at eEPS of Rs.48.09. Hence, we recommend to buy the UIL at the current price of Rs.531 for the target price of Rs.670.

Source: Company website, EWL Research

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