Q3FY23 Review: Samvardhana Motherson: Revenue strong; margin uptick on the way

9 Feb 2023 , 12:29 PM

Motherson’s Q3 Ebitda came in 10% above analysts of IIFL Capital Services estimate, mainly driven by better than expected revenue (across all segments). Consol. revenue grew 11% QoQ despite global car production being flat. Mgmt exuded confidence on continued revenue growth as new programs (part of order book) start translating into revenue. Ebitda margin was stable QoQ. They feel that the worst in terms of inflation is behind us. Commodity prices have come off, so has energy price in Europe. These, combined with successful pricing negotiations with customers should drive improvement in margins in coming quarters.

Motherson’s revenue grew 11% QoQ despite global car production being flat. This was partly driven by strong recovery in EU, to which Motherson has higher exposure. Meanwhile, the flow of new orders has been strong. In H1FY23, order-book (net of commenced orders) had grown from EUR16.1bn at Mar-2022 to EUR18.2bn at Sep-2022, with EUR4.9bn new order wins in H1FY23. 

Q3 consol. revenue grew 26% YoY and 11% QoQ (8% beat). Revenue growth was strong across the board (standalone +36%, SMP +20%, SMR +31%) and exceeded estimates. Margins were largely stable QoQ, with QoQ rise in energy cost acting as a headwind. Ebitda (+46% YoY, +12% QoQ) came in 10% above est.

Overall, analysts of IIFL Capital Services believe consolidated margins can go back to normalised levels of 9-10% (7.8% in Q3), pushing up earnings. FCF generation is likely to stay strong, with high capex phase behind us. They largely maintain their above consensus EPS estimates.

Analysts of IIFL Capital Services maintain buy with target price of Rs 96.