Accumulate Motherson Sumi; target of Rs 241: PLilladher

Prabhudas Lilladher`s research report on Motherson Sumi

“Motherson Sumi.s (MSS.) Q4FY13 results were in line with our estimates, mainly led by higher EBITDA margin on a standalone business at 22.0 percent and 8.4 percent EBITDA margin at SMR level. However, SMP.s performance was disappointing on account of a 11.9 percent YoY decline in top-line in Euro terms (4.8 percent in rupee terms) on account of three car models going for a major facelift, thereby, leading to a lower-than-expected EBITDA margin of 3.1 percent. Going forward, in our view, sales as well as margins will improve, with increased utilisation at SMR, improvement in volumes for MSIL (standalone business) and improvement in margins at SMP. At the CMP, the stock is trading 14.9x FY14E and 11.4x FY15E earnings, which in our view, is attractive, given the ~32.0 percent CAGR in earnings for FY13-FY15E. Hence, we reiterate our .Accumulate. call on the stock with a SOTP-based target price of Rs241 (roll over to FY15E).”

“Net sales within India on a consolidated basis grew by 3.7 percent YoY at Rs12.9bn, whereas exports increased by 3.6 percent YoY to Rs53.0bn. On a consolidated basis, top-line was up 3.9 percent to Rs66.8bn (PLe: Rs69.5bn), while EBITDA margins improved by 180bps YoY at 8.5 percent on account of 330bps improvement in the standalone margins. As a result, the overall consolidated EBITDA grew by 33.2 percent YoY to Rs5.6bn higher than our estimate of Rs5.3bn. On account of lower interest outgo, PAT (Adj. for the MTM forex loss of Rs345m, grew by 61.9 percent YoY to Rs1.61bn in line with our estimate of Rs1.59bn. Net sales within India on a standalone basis grew by 4.4 percent YoY at Rs10.5bn, whereas, exports declined by 15.8 percent to Rs1.6bn. This led to a 1.7 percent YoY increase in standalone top-line to Rs12.3bn. However, the top-line is strictly not comparable since in Q4FY12, one of the companies (SMIEL) was merged with parent. Adjusted for a top-line of Rs1.8bn (pertaining to SMIEL), the top-line has grown by 19.5 percent YoY. EBITDA margins improved by 330bps YoY to 22.0 percent, with EBITDA reporting a growth of 19.6 percent YoY at Rs2.7bn. On account of lower interest expenses and tax outgo, Adj. PAT for the quarter grew by 30.0 percent YoY to Rs1.58bn (Forex MTM loss of Rs207m).”

“We expect better times ahead for MSSL, with the execution of new order book at SMR and improvement in margins at SMP over the next one year. At the CMP, the stock is trading 14.9x FY14E and 11.4x FY15E earnings, which in our view, is attractive, given the ~32.0 percent CAGR in earnings for FY13-FY15E. Hence, we maintain our .Accumulate. call on the stock with a SOTP-based target price of Rs241 (Standalone business at Rs222 based on 15x FY15E EPS + acquisitions valued at Rs20 based on 4x FY15E EV/EBITDA),” says Prabhudas Lilladher research report.    

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