Motherson Sumi Systems :: Prabhudas Lilladher MID-CAP top pick

Diversified business model: With over 120 manufacturing locations spread
across 25 countries, Motherson Sumi Systems (MSSL) has established a strong
presence globally across various product lines of the automotive component
industry such as wiring harnesses, polymer processing, rear-view vision
systems and integrated modules. With the acquisition of Peguform, the
management is confident of reaching revenue of US$5bn in 2015 as against
US$2.9bn currently.
Revenue potential of €150m from SMR’s second plant at Hungary: SMR has
shown consistent improvement in performance and has recorded the highest
ever annual sales of €860m, registering a growth in sales of 14%. SMR has
started commercial production and supplies from its second plant in Hungary
to support German OEMs. The plant has an installed capacity of 6m mirrors
per annum and sale potential of €150m per annum. SMR is setting up new
facilities in Brazil, Thailand, China and Pune (India) for mirror manufacturing
and vertical integration, where production will commence in the coming year.
Samvardhana Motherson Peguform’s (SMP's) top-line last year was €1.67bn:
With annual sales of €1.67bn, SMP is now the largest subsidiary of MSSL on a
full-year basis. Peguform’s capex was at €32m for five months (Nov’11 to
Mar’12). Debt on the books of Peguform is at €392m i.e. Rs27bn including
€193m debt taken for acquisition by MSSL and Samvardhana Motherson
Finance as of March 31, 2012. We have built in revenues at €2.0bn and
EBITDA margin of 4.0% for Peguform in FY13E.
SMR’s and SMP’s new orders of €1.3bn each to improve visibility: MSSL has
won orders to the tune of €1.3bn (US$1.6bn) for Peguform; this is a very
positive development as Peguform’s quarterly run-rate is €470m. At SMR,
similar kind of order to the tune of €1.35bn has been won. Both the above
orders would be executed from FY15 onwards.
Valuations attractive; Maintain ‘Accumulate’: We expect better times ahead
for MSSL, with the execution of new order book at SMR and improvement in
margins at Peguform over the next one year. At the CMP, the stock is trading
at 12.6x FY13E and 10.9x FY14E earnings, which in our view, is attractive,
given the 35.0% CAGR in earnings for FY12-FY14E.

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