[Exclusive] Mando Secures ADAS Supply Deals with China's Boya and Russia's Gaz: Braking and Steering "Global Order Jackpot"

India Mahindra and US Rivian followed by China Boya and Russia GAZ ADAS supply
Orders for braking, steering, and suspension parts too... Securities firms "Focus on profit improvement, target prices raised"

[Asia Economy Reporter Lee Seon-ae] Mando is set to make a full-scale leap as a global automotive parts company. Following India’s Mahindra and the U.S. Rivian, Mando has decided to supply Advanced Driver Assistance System (ADAS) components, key parts related to autonomous driving, to China’s VOYAH and Russia’s GAZ. With a series of global client parts orders, Mando’s corporate value is expected to be re-evaluated this year. The securities industry is focusing on Mando’s growth potential and valuation (stock price level relative to performance), leading to a flood of target price upgrades and buy recommendations.

On the 24th, according to related industries such as automotive and securities, it was confirmed that Mando signed ADAS parts supply contracts with China’s VOYAH and Russia’s GAZ. Mando’s ADAS products, including front cameras and front radars, will be installed in VOYAH and GAZ vehicles.

Mando is actively entering the global ADAS market by acquiring 100% of the shares (purchased for 165 billion KRW) of 'MHE (Mando Hella Electronics),' a company specializing in autonomous driving and electronic components. MHE is a joint venture established in 2008, with German HELLA and Hanwha Holdings, Mando’s largest shareholder, each holding 50%. MHE specializes in autonomous driving and electronic components, designing and producing ADAS parts related to 'perception' such as radar and cameras, as well as parts in the 'judgment and control' fields like braking and steering (ECU).

Due to HELLA’s shareholding, it had been difficult to fully expand its global sales network, but with this share acquisition, such issues have been completely resolved, effectively marking the start of Mando’s global ADAS market penetration from this year. Mando plans to expand local operations using MHE’s overseas production bases in Suzhou, China, and Chennai, India, and based on this, also plans to enter the North American and European markets. However, Mando’s public relations office officially stated that they "cannot confirm the facts due to internal policy" regarding the ADAS parts orders from China’s VOYAH and Russia’s GAZ.

Previously, Mando became the world’s first to enter the Indian ADAS market and is currently supplying ADAS such as front radars and front cameras with Automatic Emergency Braking (AEB) systems that activate brakes automatically in emergencies for Mahindra products. Mando’s ADAS is also installed in electric delivery vans produced by U.S. electric vehicle startup Rivian for Amazon. Amazon signed a contract to purchase 100,000 electric vans from Rivian, and these vans include Mando ADAS products such as front radars, front cameras, and AEB functions.

New parts orders jackpots for steering, braking, and suspension are also continuing. Mando developed electronically controlled steering and braking devices and signed a supply contract (500,000 units) with U.S. electric vehicle startup Canoo. Additionally, it is reported that Mando has signed related parts supply contracts with Chinese electric vehicle manufacturer NIO. Junho Park, a researcher at Hanwha Investment & Securities, said, "Mando has secured sales channels with Chinese electric vehicle OEM N and North American company C. Although the short-term volume for new customers is not large, due to the nature of emerging electric vehicle OEMs, production volume will increase sharply after mass production starts, and it is important to note that supply will begin mainly with products that have a high ASP (average selling price)." However, he added that the company names cannot be disclosed due to Non-Disclosure Agreements (NDA).

Recently, Mando signed a suspension supply contract worth about 1.4 trillion KRW with Volkswagen (total 50 million units, 12.5 million vehicles). Regarding this, researcher Park explained, "The expected annual sales from the parts supply contract with Volkswagen is estimated at around 130 billion KRW. This order could lead to increased parts supply or targeting Volkswagen China, highlighting the need for Mando’s capacity expansion." This indicates high expectations that the Volkswagen suspension order will not end as a simple parts order.

Accordingly, securities firms continue to raise Mando’s target stock price. IBK Investment & Securities raised it by 93.88% to 95,000 KRW, Heungkuk Securities by 33.33% to 80,000 KRW, DB Financial Investment by 59.01% to 97,000 KRW, and Hana Financial Investment by 7.59% to 85,000 KRW. Kiwoom Securities, eBest Investment & Securities, Shinhan Financial Investment, and Hanwha Investment & Securities set target prices at 100,000 KRW, 110,000 KRW, and 91,000 KRW respectively.

The valuation is also attractive. According to FnGuide, Mando’s 12-month forward price-to-earnings ratio (PER) is around 15 times, which is low compared to global ADAS companies. The average 12-month forward PER of global ADAS companies such as Denso, Continental, Valeo, and Aptiv is 26.7 times. The securities industry believes that Mando’s PER could rise to around 25 times without difficulty. Mando’s operating profit consensus for this year is 320.9 billion KRW, a 261.7% increase from last year, and is expected to surpass the record-high operating profit of 305 billion KRW in 2016.