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Motherson Sumi Systems Ltd.
Encouraging Q1
„Sales growth strong, but earning miss on one offs
Motherson Q1FY12 net profit at Rs653mn grew 10%, but missed our estimate by
19%. Key reason for the earnings miss is the sharp jump in start up cost of two
new factories ahead of beginning commercial operation. Key positive take away
for us was (1) total sales growth of 21% including 34% in India despite adverse
macro, and (2) EBITDA growth of 40% in India.
Strength in India business being driven by higher content
Motherson managed to achieve 34% sales growth India in Q1FY12 despite flat
car sales. This was possible due to surprising rise in content per car. Strong sales
growth in Q1FY12 addressed concerns over our expectation of 31% sales growth
in India in FY12e and 21% growth in FY13e.
Global mirror business margin recovery on anvil
EBITDA margin of SMR, the subsidiary operating the automotive mirror business
globally, declined to 5.1% in Q1FY12 compared to our expectation of 8% and
FY12e expectation of 9.5%. Decline in EBITDA margin is owing to full volume trial
run ahead of starting commercial production in a new factory in Hungary. Higher
utilisation from Q2FY12e onward likely to boost margin of SMR.
Maintain Buy on strong growth and upside risks
Motherson is trading at a PE of 17.4x FY12e and 13.2x FY13e. We maintain our
Buy rating owing to 30%+ EPS growth in FY12e and FY13e and over 20% upside
risk to earnings in FY13e owing to possible consolidation of Peguform and SMIEL
which Motherson has decided to acquire recently.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Motherson Sumi Systems Ltd.
Encouraging Q1
„Sales growth strong, but earning miss on one offs
Motherson Q1FY12 net profit at Rs653mn grew 10%, but missed our estimate by
19%. Key reason for the earnings miss is the sharp jump in start up cost of two
new factories ahead of beginning commercial operation. Key positive take away
for us was (1) total sales growth of 21% including 34% in India despite adverse
macro, and (2) EBITDA growth of 40% in India.
Strength in India business being driven by higher content
Motherson managed to achieve 34% sales growth India in Q1FY12 despite flat
car sales. This was possible due to surprising rise in content per car. Strong sales
growth in Q1FY12 addressed concerns over our expectation of 31% sales growth
in India in FY12e and 21% growth in FY13e.
Global mirror business margin recovery on anvil
EBITDA margin of SMR, the subsidiary operating the automotive mirror business
globally, declined to 5.1% in Q1FY12 compared to our expectation of 8% and
FY12e expectation of 9.5%. Decline in EBITDA margin is owing to full volume trial
run ahead of starting commercial production in a new factory in Hungary. Higher
utilisation from Q2FY12e onward likely to boost margin of SMR.
Maintain Buy on strong growth and upside risks
Motherson is trading at a PE of 17.4x FY12e and 13.2x FY13e. We maintain our
Buy rating owing to 30%+ EPS growth in FY12e and FY13e and over 20% upside
risk to earnings in FY13e owing to possible consolidation of Peguform and SMIEL
which Motherson has decided to acquire recently.
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