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Research
Buy Motherson Sumi Systems - 1QFY2013 Result Update - Angel Broking
Posted On : 2012-09-03 20:59:00( TIMEZONE : IST )
Motherson Sumi Systems' (MSS) consolidated net profit was significantly below our estimates despite a better-than-expected operating performance, primarily on account of foreign exchange loss of Rs.175cr. The adjusted EBITDA margins for the consolidated operations were broadly in line with our estimates, led by a sharp improvement in operating performance at Samvardhana Motherson Polymers (SMPL). However, margins at Samvardhana Motherson Reflectec (SMR) remained under pressure due to capacity ramp up at the new plants. We expect the company's performance to improve going ahead due to execution of new orders at SMR through ramp up of new plants and restructuring of operations at Peguform. We maintain our Buy rating on the stock.
Forex loss overshadows strong operating performance: MSS registered a flat growth in revenues on a sequential basis to Rs.6,388cr due to a sluggish revenue growth in India (down 8.4% qoq) and overseas operations (flat qoq). On a y-o-y basis though, the top-line grew by 177.7% led by consolidation of SMPL operations which contributed Rs.3,285cr to the top-line. SMR revenues too reported a strong growth of 24.2% yoy (flat qoq) to Rs.1,606cr driven by a pick-up in order execution at the new plants in Hungary. The adjusted EBITDA margin improved slightly on a sequential basis (down 100bp yoy) to 7.1% as a decline in standalone margins (down 210bp to 16.6%) was offset by a sharp margin improvement (up 260bp to 4.2%) at SMPL. The reported PAT however, came in only at Rs.8cr due to mark-to-market loss of Rs.175cr. MSS bagged fresh orders worth EUR1.3bn during 1QFY2013 at SMPL and EUR1.35bn at SMR over the last fifteen months which are expected to commence production from FY2015.
Outlook and valuation: We believe execution of orders at SMR will be the main driver of revenues going ahead. Further, a ramp-up in new capacities coupled with restructuring at SMPL will aid margin expansion in FY2013E. At Rs.183, MSS is trading at 12.2x its FY2014E earnings. We maintain our Buy rating on the stock with a revised target price of Rs.228.
