Motherson Sumi Systems
Good performance to continue; Buy
Key takeaways
Domestic performance to be decent. While car sales in India have been
lower yoy, Motherson Sumi Systems is in a position to ably combat this
deceleration through supply for new models, consolidation of vendors by
OEMs and the lower base for Maruti Suzuki. Ytd performance at its India
operations has been good, as exports have been ramped up and plants were
commissioned to meet further demand. We expect standalone revenue to
grow11.3% yoy, to `11.8bn, with adj. profit growth at 12.7% yoy, to `1.4bn.
Steady performance by SMR, SMP. We expect the Europe-centric
companies, SMR and SMP, to maintain trajectories of steadily improving
performances. We estimate SMP’s 3QFY14 EBITDA margin to be 5.8% (up
180bps yoy, lower 20bps qoq) and SMR’s at 8.8% (up 180bps yoy, lower
30bps qoq). Ahead, a recovery in European automotive production may
strongly benefit both these companies.
Consolidated results to be impressive. Consolidated revenues could grow
11.4% yoy, to `74.2bn. We expect 9.5% consolidated EBITDA margin (up
190bps yoy). We expect adjusted profit to grow 54.8% yoy, to `2.2bn (up
0.8% qoq).
Our take. The company is expected to continue marching ahead, aided by
product launches and customer additions, greater synergies from integrating
its European acquisitions and the turnaround of its unprofitable plants.
Launches by OEMs and customer additions would further boost growth. We
retain a Buy, with a target of `208. At our target, the stock would trade at 16x
Mar’15e; at the ruling price, it trades at 14.7x FY15e.
Risks. Sustained slowdown in demand, delay in launches of new models,
currency volatility.
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Good performance to continue; Buy
Key takeaways
Domestic performance to be decent. While car sales in India have been
lower yoy, Motherson Sumi Systems is in a position to ably combat this
deceleration through supply for new models, consolidation of vendors by
OEMs and the lower base for Maruti Suzuki. Ytd performance at its India
operations has been good, as exports have been ramped up and plants were
commissioned to meet further demand. We expect standalone revenue to
grow11.3% yoy, to `11.8bn, with adj. profit growth at 12.7% yoy, to `1.4bn.
Steady performance by SMR, SMP. We expect the Europe-centric
companies, SMR and SMP, to maintain trajectories of steadily improving
performances. We estimate SMP’s 3QFY14 EBITDA margin to be 5.8% (up
180bps yoy, lower 20bps qoq) and SMR’s at 8.8% (up 180bps yoy, lower
30bps qoq). Ahead, a recovery in European automotive production may
strongly benefit both these companies.
Consolidated results to be impressive. Consolidated revenues could grow
11.4% yoy, to `74.2bn. We expect 9.5% consolidated EBITDA margin (up
190bps yoy). We expect adjusted profit to grow 54.8% yoy, to `2.2bn (up
0.8% qoq).
Our take. The company is expected to continue marching ahead, aided by
product launches and customer additions, greater synergies from integrating
its European acquisitions and the turnaround of its unprofitable plants.
Launches by OEMs and customer additions would further boost growth. We
retain a Buy, with a target of `208. At our target, the stock would trade at 16x
Mar’15e; at the ruling price, it trades at 14.7x FY15e.
Risks. Sustained slowdown in demand, delay in launches of new models,
currency volatility.
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