Motherson Sumi Systems - 3QFY2013 Result Update - Angel Broking

Motherson Sumi Systems (MSS) registered a better-than-expected operating performance for 3QFY2013, driven by strong growth in the standalone operations and on the Samvardhana Motherson Reflectec (SMR) front. The consolidated net profit though was lower than expected due to the foreign exchange loss of Rs. 64cr mainly related to foreign loans. MSS continues to report sharp improvement in its operating performance driven by the increasing utilization levels at the new plants in Hungary, Brazil and Thailand. We believe that the performance should improve further going ahead led by the execution of new orders at SMR through continued ramp up at new plants and restructuring exercise undertaken at Samvardhana Motherson Peguform (SMP). The Management indicated that SMP has received substantial fresh orders from Daimler which would start getting executed from FY2015. We recommend an Accumulate rating on the stock.

Strong performance at the operating level: For 3QFY2013, MSS' consolidated revenues registered a higher-than-expected sequential growth of 13.1% to Rs. 6,663cr, driven by a strong performance at the standalone level (up 10.5%) and also on the SMR (up 16.4%) and SMP (up 12.8%) fronts. While the revenues in India grew by a healthy 9.7% qoq, revenues outside India grew strongly by 13.6% qoq. On a yoy basis, the top-line grew by 73.5%, led by consolidation of SMP operations, which contributed Rs. 3,332cr to the top-line. The adjusted EBITDA margin improved 69bp sequentially (98bp yoy) to 7.6% led by significant improvement in performance in standalone operations (margins improved 380bp qoq to 18.9%) and at the SMR front (margin improvement of 200bp to 7%). The performance at the SMP level too remained stable. Led by strong operating performance, the EBITDA jumped 24.3% qoq (99% yoy) to Rs. 509cr. Nevertheless, the bottom-line declined 25.1% qoq to Rs. 103cr as MSS witnessed a forex loss of Rs. 64cr.

Outlook and valuation: We believe execution of orders at SMR and SMP will be the key to revenue and profitability growth going ahead. At Rs. 190, MSS is trading at 14.5x its FY2014E earnings. We recommend an Accumulate rating on the stock with a target price of Rs. 209, based on 16x FY2014E earnings (in line with its 5-year historical PE multiple).

Source : Equity Bulls

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