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Motherson Sumi Systems Limited |
Below expectation, Lower rating to Accumulate |
ACCUMULATE
CMP: Rs 186 Target Price: Rs 200
n Results below expectation due to lower sales/profitability at SMR/other subsidiaries. Standalone entity delivers stellar performance
n SMR’s FY10 performance driven by repeat business for old/existing models. Business from new programs from 2011
n Demand outlook remains strong across geographies adjusting impact of incentive schemes of last year
n Lower FY11/FY12 EPS by 18%/4%. Lower rating to ACCUMULATE
SMR – Operational performance marginally below est,
SMR’s net sales at Rs 10.4bn was below expectation of Rs 10.9bn. PBIDT at Rs 681
mn was below est of Rs 761 mn. PBIDT margins at 6.5% declined 70bps QoQ.
However, net profit at Rs 69 mn was significantly below our est of Rs 128 mn. We
understand that a large part of the sequential decline due to seasonality impact. Also,
2010 will be driven by sales of older/existing models. Participation in new programs will
commence from 2011. We expect strong traction in 2011 on profitability as well as sales
once share of new model increases. Also, FY12 to witness some benefited of cross
leveraging as the legacy contracts (on the cost) side starts getting exhausted.
Standalone performance – strong show continues
Standalone performance was above est. Net Sales, Adj PBIDT and Adj PAT at Rs 6.8bn,
1.1bn and Rs 577mn were 19%, 12% and 30% above est. We attribute this to strong
volume growth and higher content per car. Also, company has not yet fully benefited from
the price correction as the impact is generally with a lag of a quarter. The strong
performance is largely driven by volumes rather than price correction
Other Subsidiaries (ex SMR & Standalone) – disappoints significantly
Topline for other subsidiaries declined at Rs2.4bn (derived) was significantly below our est
of Rs 3.8bn. PBIDT at Rs 243mn while grew 2.6x YoY was also below our est of Rs 383
mn. APAT at Rs 133mn was 50% below est.
Valuation & view
We have lower our FY11E and FY12E earnings estimates by 18.1%% and 4% respectively.
We have lowered our TP by 2.5% to Rs 200 per share, valuing the company at PER of 15.4
our FY12 estimates. We lower our rating to ACCUMULATE.
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