Annual Report Analysis - Motherson Sumi :: Edelweiss PDF report link

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Motherson Sumi System’s (MSS) FY14 annual report analysis highlights significant improvement in profitability, free cash flow and return ratios, led by improvement in subsidiaries. FY14 free cash flow of subsidiaries stood at INR5.7bn from negative INR0.9bn in FY13, primarily owing to higher PBT (FY13: INR1.9bn, FY14: INR8.4bn) and release of working capital of INR2.8bn following surge in trade and other payables by INR13.9bn. Subsidiaries SMR and SMP posted modest 7.7% growth in revenues in Euro terms, though revenues surged ~25% in INR terms aided by the ~16% depreciation in INR against the Euro in FY14. SMR saw 350bps rise in PAT margin to 5% on better performance in Hungary, USA and France. SMP’s losses reduced to Euro7mn in FY14 from Euro16mn in FY13. However, its net worth remained negative at Euro41mn. Standalone business continued to be a major profit spinner (~70% of consolidated PAT), despite contributing mere 15% to overall revenues.

What’s on Track?

Turnaround in SMR reflected in the 310bps increase in its PBIDT margin and higher RoCE at 27.3% (FY13: 13.9%).

Operating performance of other subsidiaries (excluding SMR and SMP) improved with their revenues spurting 25.6% and PAT margin standing higher at 8.8% (FY13: 6.1).

Decline in D/E ratio to 1.6x in FY14 from 2.1x in FY13 was due to increase in net worth. Better operating performance coupled with lower working capital resulted in 20% drop in net debt of SMR and SMP to Euro 410mn, as at March’14 (March’13: Euro516mn).

What needs Tracking?

Domestic wiring harness segment posted sluggish growth, with revenue rising a mere 2%.

SMP’s revenues grew by only 5% in Euro terms versus 21.6% reported in INR terms, which catapulted due to 16% depreciation in INR against the Euro (FY13: 1Euro=INR70, FY14: 1Euro=INR81).

SMP continued to report losses (post minority interest)) and its net worth remained negative at Euro41mn. Losses however reduced to Euro7mn in FY14 from Euro16mn in FY13.

LINK

https://www.edelweiss.in/research/Annual-Report-Analysis--Motherson-Sumi/27258.html