Buy Motherson Sumi; target of Rs 229: SPA Research

SPA Research is bullish on Motherson Sumi Systems and has recommended buy rating on the stock with a target of Rs 229 in its August 13, 2012 research report.

“Motherson Sumi's Q1FY13 numbers were almost inline with our estimates. Sales grew by 178% and 41% YoY on consolidated and standalone basis respectively. Even excluding Samvardhana Motherson Peguform(SMP) consolidated sales grew by 35% YoY. Peguform margins improved on expected lines to 4.19% in Q1FY13 vis-à-vis 1.63% in the sequential quarter. MSSL also managed to get new orders both in SMR & SMPL, further strengthening our view on the Company. We retain our "BUY" recommendation on the stock.”

“MSSL reported net sales of INR 64 bn, up by 178% YoY and almost flat on QoQ basis. Net sales excluding SMPL stood at INR 31 bn, up by 35% YoY & 2% QoQ. SMPL turned around and got PBT positive before adjustment of forex losses, helped by sharp improvement in its EBITDA margin (4.19% in Q1FY13 vis-à-vis 1.63% in the sequential quarter). MSSL reported net profits of INR 81 mn, down by 88% YoY & 96% QoQ, largely on account of MTM losses of INR 2009 mn in Q1FY13 vis-à-vis profit of INR 112 mn in Q1FY12 & INR 927 mn in Q4FY12. SMR reported net sales of INR 16 bn, up by 24% YoY & 1% QoQ. EBITDA margin contracted by 138 bps QoQ (expanded by 15 bps YoY) to 5.01%, largely on account of its new plant in Brazil which began operations from Q1FY13. We expect SMR's profitability to improve with ramp-up of its new plant at Hungary (size of ~Euros 150 mn) & Brazil (size of ~Euros 60 mn), set up for executing new orders. Hungary's new plant contributed Euro 21 mn in Q1FY13.”

“MSSL has become a global player with the acquisition of SMR & Peguform with strong tie-ups across auto majors. We do not expect MSSL to be significantly impacted by shutdown of Maruti's Manesar plant as its overall contribution is ~7-7.5% of its consolidated revenues. With improvement in standalone business through increased sourcing at subsidiaries, strong demand from domestic OEMs, execution of new orders at SMR through ramp up of new plants and restructuring of operations at Peguform, we expect MSSL's consolidated revenues & profits to register a CAGR of 41.8% & 51.1% respectively over FY12-FY14E. We retain our "BUY" recommendation on the stock with a target of INR 229 in 18 months, based on 5x FY14E EV/EBITDA,” says SPA Research report.  

Institutional holding more than 40% in Indian cos

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