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We were joined by Mr. Laksh Vaman Sehgal - Director-MSSL & CEO-SMR
and Mr. Pankaj K. Mittal - COO, who shared their outlook on the industry
and company.
Key highlights
n Peguform to witness synergistic benefits in the next 6 -12 months. Value creation will
be driven by complementary product profile, client profile, cross leveraging across
components to provide a bouquet to clients
n There is scope for margins improvement at Peguform, given the complementary press
capacity. Peguform buys out (~65%) lower tonnage component sub assemblies while
manufacturing higher tonnage components. MSSL produces lower tonnage
components and thus, there can be backward integration to some extent.
n Consolidated MSSL's exposure to single client is ~16% of total revenues. Disparity
exists as Peguform's key client Volkswagen group constitutes ~75% of its turnover.
MSSL aims to lower this to sub 40% going ahead, by cross leveraging the diverse
client profile of MSSL and SMR.
n Peguform caters largely to Europe (~50%), China, Mexico and Brazil. MSSL targets to
increase presence in other geographies (especially Asia) and cater to other international
manufacturers.
n Synergy also exists in terms of land, plants and assembly line sharing between SMR
and Peguform. Incremental capex requirements for meeting complex client
requirements are low.
n MSSL has increased its focus on achieving ROCE target of ~40% by 2015, driven by
increasing asset turnover and improving profitability. Minimal investments required to
cater to complex needs of high value luxury segment to lead to higher asset turnover.
n Expect new plant of SMR (Hungary/Brazil) to significantly ramp up from 3QFY12 and
full benefits to be visible in the next financial year.
n Capex estimate for FY12 is Rs 6.5 - 7bn.
Valuations
We forecast ~26% earnings CAGR over FY11-13E and ~ 70 bps improvements in EBITDA
margins on SMR ramp up. Company currently trades at 17.3x/12.9x PER and 8.5x/6.9x EV/
EBITDA on FY12/13 estimates. We have an ACCUMULATE rating with a target price of Rs
260, valuing the company at PER/EV-EBIDTA of 16.6x/8.4x our FY13 estimates. Assuming
~5% EBITDA margin for CY11, Peguform can potentially add Rs 2 to MSSL's EPS in FY13.
Currently, we have not factored in any value from Peguform due to limited information
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We were joined by Mr. Laksh Vaman Sehgal - Director-MSSL & CEO-SMR
and Mr. Pankaj K. Mittal - COO, who shared their outlook on the industry
and company.
Key highlights
n Peguform to witness synergistic benefits in the next 6 -12 months. Value creation will
be driven by complementary product profile, client profile, cross leveraging across
components to provide a bouquet to clients
n There is scope for margins improvement at Peguform, given the complementary press
capacity. Peguform buys out (~65%) lower tonnage component sub assemblies while
manufacturing higher tonnage components. MSSL produces lower tonnage
components and thus, there can be backward integration to some extent.
n Consolidated MSSL's exposure to single client is ~16% of total revenues. Disparity
exists as Peguform's key client Volkswagen group constitutes ~75% of its turnover.
MSSL aims to lower this to sub 40% going ahead, by cross leveraging the diverse
client profile of MSSL and SMR.
n Peguform caters largely to Europe (~50%), China, Mexico and Brazil. MSSL targets to
increase presence in other geographies (especially Asia) and cater to other international
manufacturers.
n Synergy also exists in terms of land, plants and assembly line sharing between SMR
and Peguform. Incremental capex requirements for meeting complex client
requirements are low.
n MSSL has increased its focus on achieving ROCE target of ~40% by 2015, driven by
increasing asset turnover and improving profitability. Minimal investments required to
cater to complex needs of high value luxury segment to lead to higher asset turnover.
n Expect new plant of SMR (Hungary/Brazil) to significantly ramp up from 3QFY12 and
full benefits to be visible in the next financial year.
n Capex estimate for FY12 is Rs 6.5 - 7bn.
Valuations
We forecast ~26% earnings CAGR over FY11-13E and ~ 70 bps improvements in EBITDA
margins on SMR ramp up. Company currently trades at 17.3x/12.9x PER and 8.5x/6.9x EV/
EBITDA on FY12/13 estimates. We have an ACCUMULATE rating with a target price of Rs
260, valuing the company at PER/EV-EBIDTA of 16.6x/8.4x our FY13 estimates. Assuming
~5% EBITDA margin for CY11, Peguform can potentially add Rs 2 to MSSL's EPS in FY13.
Currently, we have not factored in any value from Peguform due to limited information
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