CMP Rs280, Target Rs325, Upside 16.1%

• Revenues at Rs84bn came in ahead of our estimates, wherein the growth in SMR and SMP revenues was healthier than expected
• Reported operational performance in SMR (OPM at 10.6%; +217bps yoy) and SMP (OPM at 4.6%; +142bps yoy) indicated of both the businesses on a trajectory of margin expansion.
• Standalone operating margins were healthy at 22% and were better than our estimates.
• Driven by robust operational improvement in its various business units, consolidated operating margins for the company improved to 9.5% (+94bps yoy).
• Maintain BUY with a revised price target of Rs325 

Result table (Consolidated)

(Rs m)	Q4 FY14	Q4 FY13	% yoy	Q3 FY14	% qoq
Domestic	12,721	12,901	(1.4)	11,461	11.0
Exports	70,169	53,095	32.2	67,437	4.1
Net sales	84,067	66,758	25.9	79,887	5.2
Material costs	(52,800)	(42,090)	25.4	(50,447)	4.7
Purchases	(330)	(331)	(0.2)	(228)	44.5
Personnel costs	(13,890)	(11,213)	23.9	(12,726)	9.1
Other overheads	(9,090)	(7,432)	22.3	(8,821)	3.1
Operating profit	7,958	5,693	39.8	7,664	3.8
OPM (%)	9.5	8.5	94 bps	9.6	(13) bps
Depreciation	(2,129)	(1,873)	13.7	(2,174)	(2.1)
Interest	(814)	(578)	40.9	(703)	15.8
Other income	37	45	(18.8)	48	(24.0)
PBT	5,051	3,288	53.6	4,835	4.5
Tax	(1,148)	(1,378)	(16.7)	(1,566)	(26.7)
Effective tax rate (%)	22.7	41.9		32.4
Other provisions / minority etc	(1,588)	(297)	435	(1,042)	52.4
Adjusted PAT	2,316	1,613	43.6	2,228	4.0
Adj. PAT margin (%)	2.8	2.4	34 bps	2.8	(3) bps
Foreign exchange (loss)/gain	709	346		268
Reported PAT	3,025	1,959	54.5	2,496	21.2
Ann. EPS (Rs)	20.6	13.3	54.5	17.0	21.2

Source: Company, India Infoline Research

Standalone Operations
Standalone business reported revenues at Rs12.5bn (4.6% lower than estimates) implying a growth of 1.5% yoy in a weak domestic auto market.  While the domestic revenues were down by only 2.8% export revenues were strong with a 28.5% yoy jump. While the exports markets have been slow, we note that there has been steady 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 22% better than our estimates. 

Result table (Standalone)

(Rs m)	Q4 FY14	Q4 FY13	% yoy	Q3 FY14	% qoq
Domestic	10,226	10,521	(2.8)	9,181	11.4
Exports	2,007	1,561	28.5	1,681	19.4
Net sales	12,502	12,321	1.5	11,059	13.0
Material costs	(6,432)	(6,700)	(4.0)	(5,956)	8.0
Purchases	(306)	(330)	(7.0)	(230)	33.4
Personnel costs	(1,277)	(1,117)	14.3	(1,222)	4.5
Other overheads	(1,758)	(1,469)	19.7	(1,552)	13.3
Operating profit	2,729	2,706	0.9	2,100	30.0
OPM (%)	21.8	22.0	(13) bps	19.0	284 bps
Depreciation	(368)	(429)	(14.2)	(396)	(7.0)
Interest	(113)	(128)	(11.6)	(117)	(3.8)
Other income	572	166	244.9	15	3,661.8
PBT	2,820	2,314	21.8	1,602	76.0
Tax	(920)	(729)	26.2	(539)	70.6
Effective tax rate (%)	32.6	31.5		33.7
Adjusted PAT	1,900	1,585	19.8	1,063	78.8
Adj. PAT margin (%)	15.2	12.9	233 bps	9.6	559 bps
Foreign exchange (loss)/gain	225	207		174