Motherson Sumi Systems - SMR disappoints, Retain ACCUMULATE:: Emkay

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Motherson Sumi Systems Ltd.

SMR disappoints, Retain ACCUMULATE

ACCUMULATE

CMP: Rs230                                        Target Price: Rs260

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n     Consolidated performance below est. with EBIDTA/PAT being 25%/50% below est. at Rs 1.9bn/653mn. Sharp drop in SMR margins to 5.1% and high tax rate (48%) are the key reasons

n     Drop in SMR margins due to start up cost of two new plants at Hungary/Brazil. As the ramp in production happens margins should return to normalized levels (from 3QFY12)

n     Expect benefits of cross leveraging to start from 2HFY12. Lower our FY12 EPS by 11% to Rs 11.6 to factor in poor 1QFY12. Retain FY12 EPS at Rs 15.7 per share

n     Retain ACCUMULATE rating with a price of Rs 260 per share valuing the company at PER/EV-EBIDTA of 16.6x/8.4x on FY13E. Expect Peguform consolidation from 3QFY12/4QFY12