Accumulate Motherson Sumi; target of Rs 200: Emkay

Emkay Global Financial Services is bullish on Motherson Sumi Systems and has recommended accumulate rating on the stock with a target of Rs 200 in its August 10, 2012 research report.

“Motherson Sumi’s, adjusted EBITDA/APAT above est. led by better than anticipated operational performance in standalone and SMPL business. Net sales stood at Rs 63.9 bn (+178% YoY, -0.6% QoQ) broadly in-line with our expectations. Standalone business reported revenues of Rs 10.6 bn (41%YoY, -12 % QoQ) while SMR and SMPL reported revenues of Euro 232 mn (15% YoY/-3.5% QoQ) and Euro 474 mn (-7.1% QoQ) respectively. EBITDA (adjusted for forex) at Rs 4.5 bn was above our est. of Rs 3.6 bn, EBITDA margins stood at 7.1% vs our est. of 5.8%. Beat in both standalone (16.6% vs est. of 15.8%) and SMPL (4.2% vs est. of 1.7%) business led to margin surprise. SMR EBITDA margin at 5.8% (vs est. of 7%) was impacted due to start-up costs associated with Brazil plant which begun operations during the quarter. Adjusted net profit stood at Rs 2.1 bn (287% YoY, 107% QoQ).”

“Revenues continue to grow at strong double digits led by new model launches and more value add per car. MSSL has also added new clients during the quarter. Expect strong growth in exports to continue led by higher sales to SMR. SMR exports stood at Rs 250 mn during Q1. Capex is expected at Rs 2.5 bn for FY13.  We revise our revenue estimates by 3.7%/3.1% in FY13/14 largely to factor in better than anticipated growth in the standalone business. Our EBITDA margin estimates are revised upwards by 50 bps/70 bps in FY13/14 - sharp increase in our EBITDA margin estimates for SMP (4%/4.5% vs earlier est. of 2.5%/3.5%) more than offsets the 100 bps cut in margins for SMR in FY13. Higher depreciation cost restricts EPS revision to 6.6%/3.1% at Rs 16.2/19 in FY13/14.”

“At CMP of Rs 172, the stock trades at PER of 10.6x/9x and EV-EBITDA of 6.4x/5.0x on our FY13/14 estimates. We value the stock on SOTP and attribute 9x EV/EBITDA to MSS and 3.6x EV/EBITDA to SMPL and SMR. We arrive at a value of Rs 200 per share and maintain our ACCUMULATE rating on the stock,” says Emkay Global Financial Services research report.

FIIs holding more than 30% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More