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For 2QFY2012, Motherson Sumi Systems’ (MSS) consolidated net profit was
significantly below our as well consensus estimates, despite better-than-expected
top-line and operating performance. Adjusted EBITDA margin at Samvardhana
Motherson Reflectec (SMR) witnessed a 289bp yoy contraction due to lower
utilization levels at the new plants in Hungary and Brazil. Further, MTM loss of
`74cr primarily on foreign currency loans and higher interest expense severely
impacted the company’s profitability. We have revised our FY2012 earnings
estimates downwards to factor in EBITDA margin pressures due to lower utilization
levels at the new plants. However, we believe operating leverage benefits due to
pick-up in order execution will enable MSS to restore its margin in FY2013.
We maintain our Accumulate view on the stock.
Lower utilization at new plants and notional forex loss affect overall performance:
For 2QFY2012, MSS posted strong 19.5% yoy (1.7% qoq) growth in top-line to
`2,339cr, led by a 13.4% (2.5% qoq) and 23.6% yoy (flat qoq) jump in domestic
and overseas sales, respectively. Overseas performance was boosted by strong
sales momentum at SMR, which grew by 21.6% yoy (down 2.2% qoq) in INR
terms. Adjusted EBITDA margin fell by 110bp yoy to 8.7%, largely due to a sharp
drop in operating margin at SMR. EBITDA margin at SMR fell by 289bp yoy to
3.3% due to unutilized capacities at the new plants in Hungary and Brazil. Net
profit fell sharply by 71.8% yoy (62.8% qoq) to `24cr, led by notional loss of
`61.4cr on foreign currency loans and a significant increase in interest cost.
Outlook and valuation: We believe execution of orders at SMR will help MSS
deliver volume and revenue growth going ahead. Further, ramp-up in new
capacities will aid margin expansion in FY2013. We expect MSS to deliver a
~15% and ~10% CAGR in its top line and bottom line, respectively, over
FY2011-13E. At `177, MSS is trading at 14.7x its FY2013E earnings. We
maintain our Accumulate rating on the stock with a revised target price of `193.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, Motherson Sumi Systems’ (MSS) consolidated net profit was
significantly below our as well consensus estimates, despite better-than-expected
top-line and operating performance. Adjusted EBITDA margin at Samvardhana
Motherson Reflectec (SMR) witnessed a 289bp yoy contraction due to lower
utilization levels at the new plants in Hungary and Brazil. Further, MTM loss of
`74cr primarily on foreign currency loans and higher interest expense severely
impacted the company’s profitability. We have revised our FY2012 earnings
estimates downwards to factor in EBITDA margin pressures due to lower utilization
levels at the new plants. However, we believe operating leverage benefits due to
pick-up in order execution will enable MSS to restore its margin in FY2013.
We maintain our Accumulate view on the stock.
Lower utilization at new plants and notional forex loss affect overall performance:
For 2QFY2012, MSS posted strong 19.5% yoy (1.7% qoq) growth in top-line to
`2,339cr, led by a 13.4% (2.5% qoq) and 23.6% yoy (flat qoq) jump in domestic
and overseas sales, respectively. Overseas performance was boosted by strong
sales momentum at SMR, which grew by 21.6% yoy (down 2.2% qoq) in INR
terms. Adjusted EBITDA margin fell by 110bp yoy to 8.7%, largely due to a sharp
drop in operating margin at SMR. EBITDA margin at SMR fell by 289bp yoy to
3.3% due to unutilized capacities at the new plants in Hungary and Brazil. Net
profit fell sharply by 71.8% yoy (62.8% qoq) to `24cr, led by notional loss of
`61.4cr on foreign currency loans and a significant increase in interest cost.
Outlook and valuation: We believe execution of orders at SMR will help MSS
deliver volume and revenue growth going ahead. Further, ramp-up in new
capacities will aid margin expansion in FY2013. We expect MSS to deliver a
~15% and ~10% CAGR in its top line and bottom line, respectively, over
FY2011-13E. At `177, MSS is trading at 14.7x its FY2013E earnings. We
maintain our Accumulate rating on the stock with a revised target price of `193.
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