Motherson Sumi (Q1 FY14)

India Infoline News Service | Mumbai |

Motherson Sumi (MSSL) reported another good set of numbers for the quarter gone by, wherein its consolidated topline grew by 11% yoy, and operating profit expanded 37% yoy.

CMP Rs204, Target Rs240, Upside 17.6%
  • Motherson Sumi (MSSL) reported another good set of numbers for the quarter gone by, wherein its consolidated topline grew by 11% yoy, and operating profit expanded 37% yoy. Revenues at Rs70.8bn came in 3.7% higher than our estimates, wherein the growth in SMR and SMP revenues was much healthier than expected. Reported operational performance in SMR (OPM at 8.6%; +364bps yoy) and SMP (OPM at 5.5%; +128bps yoy) indicated of both the businesses on a trajectory of margin expansion. Standalone operating margins were healthy at 18.1% and were in line with our estimates. Driven by robust operational improvement in its various business units, consolidated operating margins for the company improved to 8.8% (+165bps yoy).


  • In-line Standalone performance: Standalone business reported revenues at Rs10.7bn (3% lower than estimates) implying a growth of 2% yoy in a weak domestic auto market.  While the domestic revenues de-grew 1.2%, export revenues in standalone grew by 21.6% yoy. While the exports markets have been slow, we note that there has been ~80% yoy increase in exports to SMR entity from the standalone business. Management will look for similar opportunities in the SMP business also going ahead. MSSL’s standalone business witnessed a healthy operating performance wherein the OPM (excl forex effect) was recorded at 18.1% in-line with our estimates. 


  • Margins continue to improve in SMR: At SMR, revenues at Rs20.6bn grew a robust 28.4% yoy (22.1% in euro terms). All the new plants of Hungary, Brazil and Thailand reported high utilization levels and led to the healthy revenue growth. Ramp up of these new facilities and the in-sourcing opportunities continued to reflect in EBITDA margins (excl forex exchange gains/losses) which improved to 8.6% vis-à-vis 5% in Q1 FY13 and 8.4% in Q4 FY13. Going ahead, new plants capacity utilization and the in-sourcing opportunities would remain key for the margin improvement.


  • SMP turning around: It was a healthy quarter for SMP, which reported a revenue growth of 9.4% (4% in euro terms). OPM improved to 5.5% (+128bps yoy) which was much ahead of our expectations and indicates of the business turning around. Management guided to maintain its focus on breaking even the two loss making plants. Going ahead, key to margin recovery would remain the in-sourcing opportunities which we build in from Q3FY14 onwards in a meaningful way.


  • The company guided for a total capex of ~Rs8bn in FY14, of which Rs1.5bn would be in the Indian facilities and the rest would be majorly on SMP which has new plants planned. It does not envisage the need for new facilities in SMR in next two years.


  • We have revised the margin assumptions upwards for SMR and SMP, owing to increasing visibility of in-sourcing opportunities in the new order wins. In the standalone business amidst a weak auto market, the ability of MSSL to clock healthy growth and sustain its margins on back of its innovative technology and higher content per car re-instills our belief. We recommend BUY with a 9-month price target to Rs240.

Cost Analysis (Consolidated)
As a % of net sales
Q1 FY14
Q1 FY13
bps yoy
Q4 FY13
bps qoq
Raw material
62.7
64.8
(208)
63.0
(34)
Purchases
0.7
0.3
38
0.5
16
Personnel Costs
16.9
16.5
37
16.8
8
Other overheads
11.0
11.3
(33)
11.1
(15)
Total costs
91.2
92.9
(165)
91.5
(25)
Source: Company, India Infoline Research
 
Result table (Consolidated)
(Rs m)
Q1 FY14
Q1 FY13
% yoy
Q4 FY13
% qoq
Domestic
11,458
11,392
0.6
12,901
(11.2)
Exports
58,676
51,380
14.2
53,095
10.5
Net sales
70,826
63,880
10.9
66,758
6.1
Material costs
(44,412)
(41,386)
7.3
(42,090)
5.5
Purchases
(464)
(172)
169.0
(331)
40.3
Personnel costs
(11,955)
(10,544)
13.4
(11,213)
6.6
Other overheads
(7,779)
(7,226)
7.7
(7,432)
4.7
Operating profit
6,216
4,552
36.5
5,693
9.2
BSE 376.10 3.90 (1.05%)
NSE 375.90 3.55 (0.95%)

***Note: This is a NSE Chart

 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.