Just too big to ignore!!! • MSSL :: ICICI Securities, PDF link

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Just too big to ignore!!!
• MSSL reported consolidated revenues of ~| 8016 crore vs. our
estimate of ~| 8000 crore (YoY increase of ~11%)
• EBITDA margins adjusted for forex came in at 9.1%, improvement of
~40 bps QoQ and higher than our estimate of 8.7%
• Consolidated PAT at | 104.4 was dragged lower due to exceptional
expense of ~| 124 crore related to acquisition of Stonebridge and
costs related to issuance of secured notes of ~€500 million.
Adjusting for the same, PAT also came largely in line with estimates
MSL’s turnaround ability pays off, as global auto ancillaries consolidate
The standalone business – MSSL has managed to weather the slowdown
in the Indian auto industry as it becomes a large solution provider across
ancillary sub-segments for OEs. The performance was also aided by the
subsidiaries SMR/SMP, which continued to tread on the improvement
path. With margins moving from ~0% when acquired to 6%, SMP’s
turnaround is on a strong footing and has started contributing
meaningfully to the consolidated performance. With the management
guiding for at least two acquisitions by the end of FY15, business
turnaround is becoming the core business philosophy for MSL. Recently,
with the acquisition of wiring harness business of Stoneridge Inc, MSSL
has expanded in the North American market. Going ahead, this market is
likely to contribute meaningfully to its overall numbers as it increases the
content per vehicle and introduces other product-lines.
Increasing content/models/geographies aid growth as OEs back MSL
MSL has been increasing its presence across multiple product segments
and customers either by forming joint ventures for different product lines
or by cross-selling product or technologies. MSL has been able to acquire
companies available at distressed valuations with assured business from
the OEMs. The standalone business has also benefited from this and
MSSL has grown faster than the domestic auto industry by increasing
content per car as its association with the overseas subsidiaries continues
to help garner more business in India from global OEMs.
Management focus to reach audacious goals commendable
The management in its strategic business statement set an audacious
five-year goal in 2010 to reach 40% RoCE, 40% dividend payout by 2015.
With a sustained performance in the past four years & strong order-books
for both SMP, SMR, MSL has been able to reach near the target. With
significant visibility of earnings as new facilities get ramped up in
US/Germany for global clients, we believe MSL is likely to reach close to
target. Also, we expect strong growth for the domestic business as the
demand situation improves. With the next set of targets for 2020 likely to
be equally audacious, backed by the management’s strong penchant for
meeting these overreaching targets, the future roadmap appears exciting.
Outlook positive on strong growth visibility, earnings consistency
With MSL’s competence on turning around businesses evident with
success of SMR and SMP, we believe the management’s strong focus on
RoCE augurs well for the performance in the wake of strong growth
potential. MSL’s sustained performance (PAT CAGR) has driven up the
valuations in sync. Our outlook on the business remains positive with
strong growth likely from both organic and inorganic sources, which are
likely to ensure that multiples premium remains vis-à-vis peers. We value
MSL on a SOTP basis with a target price of | 512 and recommend BUY.

LINK
http://content.icicidirect.com/mailimages/IDirect_MothersonSumi_Q2FY15.pdf