Motherson Sumi Systems - Q1FY2014 Result Review - Angel Broking

For 1QFY2014, Motherson Sumi Systems (MSS) registered slightly better-than expected bottom-line (adjusted for foreign exchange loss) performance, driven by strong growth at the standalone and Samvardhana Motherson Reflectec (SMR) front. Nevertheless, net loss at Samvardhana Motherson Peguform (SMP) widened to Rs. 64cr (from Rs. 17cr in 4QFY2013) due to higher interest expense.

For 1QFY2014, consolidated revenues registered a healthy growth of 10.9% yoy (6.1% qoq) to Rs. 7,083cr, slightly better than our expectations of Rs. 6,780cr. The topline performance was driven by a strong growth of 28.4% (7.3% qoq) and 9.4% yoy (11.8% qoq) at SMR and SMP respectively led by pick-up in order execution at the new plants in Hungary, Brazil and Thailand. The standalone revenues though posted a modest growth of 1.6% yoy due to the slowdown in the domestic markets. While the revenues in India remained flat, revenues outside India grew strongly by 14.2% yoy. On the operating front, consolidated margins improved 165bp yoy (250bp qoq) to 8.8%, in-line with our expectations, primarily driven by easing of raw-material prices and also on account of improving capacity utilization across the SMR and SMP plants. Noticeably, the company witnessed margin expansion across all the three entities, standalone level and SMR and SMP front. While standalone margins improved 150bp yoy to 18.1%; SMR and SMP operations reported a significant expansion in margins to 8.6% (up 260bp yoy) and 5.5% (up 130bp yoy) respectively. As a result of the strong operating performance, consolidated EBITDA surged 36.5% yoy (9.2% qoq) to Rs. 622cr. During the quarter MSS registered a foreign exchange loss of Rs. 169cr. Adjusted for the same bottomline grew strongly by 16% yoy to Rs. 243cr, slightly ahead of our estimates of Rs. 221cr. While the SMR bottom-line stood at Rs. 37cr (against a loss of Rs. 2cr in 1QFY2013 and Rs. 33cr profit in 4QFY2013); standalone net profit grew by 22% yoy to Rs. 81cr. At Rs. 204, the stock is trading at 12.7x FY2015E earnings. We recommend a Buy rating on the stock with a target price of Rs. 242.

Source : Equity Bulls

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