Hold Motherson Sumi Systems; target Rs 197: SPA Research

SPA Research has recommended hold rating on Motherson Sumi Systems (MSS) with a target price of Rs 197, in its February 14, 2013 research report.

"Motherson Sumi reported Q3FY13 results which were inline with our estimates barring currency fluctuation. Sales grew by 73.5% YoY and 27.2% YoY on consolidated and standalone basis respectively. EBITDA margin expanded by 315 bps YoY & 70 bps QoQ to 7.65% on the back of improved utilization levels and favorable product mix. PAT margin expanded by 144 bps YoY to 1.55%. MSSL reported net sales of INR 66.6 bn, up by 73.5% YoY & 13.1% QoQ. It derived ~83% of its revenues from overseas market and ~17% from India. EBITDA margin expanded by 315 bps YoY to 7.65%, due to improved utilization levels and favorable product mix. The company has reported a forex loss of INR 639 mn in this quarter vis-à-vis a gain of INR 676 mn in the sequential quarter. The demand from countries like Brazil, Thailand, USA, and China has been strong enough to offset the slowdown seen in France and Spain.

MSS standalone sales registered a growth of 27.2% YoY & 10.5% QoQ to INR 10.6 bn. EBITDA margin expanded by 286 bps YoY & 380 bps QoQ to 18.93 on the back of lower COGS (57.3% of sales in Q3FY13 against 61% of sales in Q2FY13). PAT stood at INR 1169 mn, up by 113% YoY & 8.9% QoQ.

SMP's revenue has grown by 12.8% QoQ to INR 33.3 bn contributing ~50% to the consolidated revenue. EBITDA margin has increased by 25 bps QoQ to 3.96%. It has reported a loss of INR 339 mn against a profit of INR 79 mn in the sequential quarter due to forex loss of INR 518 mn in Q3FY13 vis-à-vis a gain of INR 574 mn in Q2FY13. SMP has received a substantial order from Diamler (quantum not yet disclosed).

SMR reported net sales of INR 18.4 bn, up by 20.8% YoY & 16.4% QoQ. EBITDA margin has expanded by 214 bps YoY & 205 bps QoQ to 7.04%. PAT stood at INR 153 mn, up by 64.2% YoY & 150.7% QoQ. In Q3FY13, It has recognized an impairment loss of ~INR 140 mn for one of its plants. The new plant at Hungary is currently operating at ~50% utilization levels and is expected to reach 85% by the end of FY14.

With improvement in standalone business through increased sourcing at subsidiaries, ramp up of new plants at SMR, improvement in utilization levels we expect MSSL's consolidated revenues & profits to register a growth of 17% & 70.3% respectively in FY14. In FY14E, we expect the INR to appreciate against dollar which would be beneficial for the company (against a forex loss of INR 1973 mn in 9MFY13). We revise our recommendation from "BUY" to "HOLD" with a target price of INR 197 in 9 months based on 6x FY14E EV/EBIDTA," says SPA Research report.

Non-Institutions holding more than 90% in Indian cos

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