Motherson Sumi (Q3 FY13)

India Infoline News Service | Mumbai |

MSSL’s standalone business witnessed a strong operating performance wherein the OPM (excluding forex effect) improved to 18.9% higher by 286bps yoy and 380bps qoq.

CMP Rs190, Target Rs217, Upside 14.2% 
  • Motherson Sumi (MSSL) reported a very healthy set of numbers with consolidated net sales of Rs66.6bn registering a growth of 73.5% yoy and 13.1% qoq. Although the Peguform acquisition (SMP) provided the major fillip in top line, the growth in standalone + SMR revenues (+23.2% yoy) was ahead of our expectations. While the sequential recovery in SMP revenues (+12.8% qoq) was guided, significant beat in our estimates came in on the SMR side (13% higher than estimates) which grew a healthy 17.4% in euro terms. The beat was on back of faster than expected ramp up in the new facilities (Hungary, Brazil and Thailand) of SMR. The standalone revenues were 4.6% ahead of estimates and sustained growth in revenues indicated at factors like higher content per car playing out well for MSSL in a weak domestic auto market.
  • MSSL’s standalone business witnessed a strong operating performance wherein the OPM (excluding forex effect) improved to 18.9% higher by 286bps yoy and 380bps qoq. 
  • At SMR, ramp up of new facilities reflected in EBITDA margins (excl forex exchange gains/losses) which improved to 7% vis-à-vis 4.9% in Q3 FY12 and 5% in Q2 FY13. The depreciation expenses were higher (+38.9% qoq) on back of provision for impairment loss for one of SMR subsidiaries, and concern share PAT was thereby noted at Rs153mn.
  • We note that the Hungary plant now operates at ~50% utilization levels and the other significant plants of Brazil and Thailand set up last year have also started production. SMR continues to focus on its strategy to diversify the business from the European customers by supplying to Japanese players such as Honda and also Renault-Nissan.
  • At SMP, a sequential recovery in top line was noted after the effect of holiday season in Europe was seen in Q2 FY13. At the operating level, OPM (excluding forex gain/losses) was recorded at 4% improving slightly over Q2 FY13. However at the PAT level, SMP recorded losses of Rs560mn (Concern share loss: Rs339mn) mainly on back of a forex loss accounted of Rs518mn. Of the four major plants identified for restructuring, three plants have come to breakeven levels and management guides for continued operational improvement going ahead. Additionally management informed of having won a significant order from Daimler in Germany which would accrue to topline from FY15. 
  • The consolidated gross debt levels were noted higher Rs50.6bn vis-a-vis Rs46bn at end of Q3 FY12 mainly on back of ~7% yoy depreciation in INR against the Euro.
  • While for SMR the sales have seen some softness in France and Spain, constant order wins in other markets (USA, Brazil, Thailand, China, India) have enabled SMR to clock higher than expected topline. We revise our estimates upwards for SMR. However, we slightly moderate our estimates in SMP sales growth. 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 Rs217.
  • MSSL is considering 1) Preferential allotment of shares to Sumitomo Wiring Systems Limited, a promoter of the company up to 14,698,656 equity shares i.e. 2.5% of existing equity shares and 2) Issue of shares to Qualified Institutional Buyer through Qualified Institutions Placement up to 44,095,968 equity shares i.e. 7.5% of existing equity shares. At CMP of Rs190, MSSL will raise Rs11.2bn enabling it to reduce leverage.
Cost Analysis (Consolidated)
As a % of net sales Q3 FY13 Q3 FY12 bps yoy Q2 FY13 bps qoq
Raw material 62.9 61.1 171 64.0 (116)
Purchases 1.3 1.3 1 0.7 64
Personnel Costs 16.6 15.6 92 17.0 (50)
Other overheads 11.6 15.3 (362) 11.3 33
Total costs 92.4 93.3 (98) 93.0 (69)
Source: Company, India Infoline Research

Result table (Consolidated)
(Rs m) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Domestic 11,184 8,751 27.8 10,195 9.7
Exports 54,295 28,973 87.4 47,811 13.6
Net sales 66,626 38,408 73.5 58,905 13.1
Material costs (41,880) (23,486) 78.3 (37,712) 11.1
Purchases (874) (500) 74.9 (394) 122.2
Personnel costs (11,027) (6,003) 83.7 (10,043) 9.8
Other overheads (7,751) (5,860) 32.3 (6,656) 16.4
Operating profit 5,095 2,560 99.0 4,100 24.3
OPM (%) 7.6 6.7 98 bps 7.0 69 bps
Depreciation (1,961) (1,046) 87.5 (1,668) 17.5
Interest (624) (414) 50.8 (633) (1.4)
Other income 48 36 34.0 38 24.2
PBT 2,557 1,136 125.1 1,837 39.2
Tax (936) (518) 80.6 (821) 14.0
Effective tax rate (%) 36.6 45.6
44.7
Other provisions / minority 48 773 (94) (316) (115.2)
Adjusted PAT 1,669 1,391 20.0 700 138.4
Adj. PAT margin (%) 2.5 3.6 (112) bps 1.2 132 bps
Foreign exchange loss/(gain) (639) (1,639)
676
Reported PAT 1,030 (247) (516.7) 1,376 (25.1)
Ann. EPS (Rs) 7.0 (1.7) (512.0) 9.4 (25.1)
 Source: Company, India Infoline Research

Result table (Standalone)
(Rs m) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Domestic 8,959 7,040 27.3 8,023 11.7
Exports 1,450 1,163 24.6 1,451 (0.1)
Net sales 10,645 8,373 27.1 9,634 10.5
Material costs (5,989) (5,008) 19.6 (5,483) 9.2
Purchases (112) -
(394) (71.7)
Personnel costs (1,138) (788) 44.5 (1,045) 8.9
Other overheads (1,392) (1,232) 13.0 (1,255) 10.9
Operating profit 2,015 1,345 49.8 1,457 38.3
OPM (%) 18.9 1
BSE 378.70 6.65 (1.79%)
NSE 378.55 6.25 (1.68%)

***Note: This is a NSE Chart

 

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