Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Motherson Sumi Systems Ltd.
Better time ahead
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„Benefit of capex surge since FY11 to kick in from FY12
Motherson has stepped up capex to Rs5bn since FY11 compared to Rs2-3bn in
prior years. Capex includes (1) new mirror plant in Hungary and Thailand (2)
Plastic plant in South Africa and Brazil. Hungary plant will start from Apr and other
plants by end of CY2011. Additional revenue from the new plants for new
customers and market will kick in partly from FY12 and have full impact in FY13.
Aiming to double SMR margin to 10-12% in couple of years
EBITDA margin of SMR, the global mirror unit contributing to 50% of revenue and
27% of EBITDA in Q3FY11 is likely to see significant margin expansion in next
two quarters compared to only 6% for the quarter. Key driver of margin expansion
in next couple of quarters will be reduction in raw material cost owing to increase
in sourcing of wiring harness from the parent comany i.e. Motherson and cheaper
pricing from suppliers. However, company may take a couple of years to reach its
10-12% EBITDA margin target in SMR due to ongoing capacity expansion and
new model launch related expenses that could continue till end of FY12.
Strong growth & profitability of India unit to sustain
Motherson India revenue is growing at over double the rate car sales growth and
earning 16.5%+ EBITDA margin. Such strong growth along with high profitability
could continue despite rising copper price, the key raw material. Key drivers likely
to be: (1) rising value of electrical and plastic parts in car (2) increase in number
of contents per car and market share and (3) sustained cost reduction along with
higher productivity.
Price objective basis & risk
Motherson Sumi (XMSUF)
Our PO of Rs220 is based on 15x FY12E EPS of Rs14.7. We expect the stock to
trade at the average one-year-forward PE of the auto sector. Our positive outlook
on the company is supported by its robust track record and the high valuation
enjoyed by the company in the past. Risks are (1) the possibility of a sharp
decline in demand for auto parts and (2) a possible conflict of interest among joint
venture partners, given similar lines of businesses.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Motherson Sumi Systems Ltd.
Better time ahead
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„Benefit of capex surge since FY11 to kick in from FY12
Motherson has stepped up capex to Rs5bn since FY11 compared to Rs2-3bn in
prior years. Capex includes (1) new mirror plant in Hungary and Thailand (2)
Plastic plant in South Africa and Brazil. Hungary plant will start from Apr and other
plants by end of CY2011. Additional revenue from the new plants for new
customers and market will kick in partly from FY12 and have full impact in FY13.
Aiming to double SMR margin to 10-12% in couple of years
EBITDA margin of SMR, the global mirror unit contributing to 50% of revenue and
27% of EBITDA in Q3FY11 is likely to see significant margin expansion in next
two quarters compared to only 6% for the quarter. Key driver of margin expansion
in next couple of quarters will be reduction in raw material cost owing to increase
in sourcing of wiring harness from the parent comany i.e. Motherson and cheaper
pricing from suppliers. However, company may take a couple of years to reach its
10-12% EBITDA margin target in SMR due to ongoing capacity expansion and
new model launch related expenses that could continue till end of FY12.
Strong growth & profitability of India unit to sustain
Motherson India revenue is growing at over double the rate car sales growth and
earning 16.5%+ EBITDA margin. Such strong growth along with high profitability
could continue despite rising copper price, the key raw material. Key drivers likely
to be: (1) rising value of electrical and plastic parts in car (2) increase in number
of contents per car and market share and (3) sustained cost reduction along with
higher productivity.
Price objective basis & risk
Motherson Sumi (XMSUF)
Our PO of Rs220 is based on 15x FY12E EPS of Rs14.7. We expect the stock to
trade at the average one-year-forward PE of the auto sector. Our positive outlook
on the company is supported by its robust track record and the high valuation
enjoyed by the company in the past. Risks are (1) the possibility of a sharp
decline in demand for auto parts and (2) a possible conflict of interest among joint
venture partners, given similar lines of businesses.
No comments:
Post a Comment