Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

Motherson Sumi Systems - Greenfield plants loss reduction a key positive - ICICI Securities

Posted On: 2020-08-12 02:56:18

Motherson Sumi Systems' (MSS) Q1FY21 performance missed consensus estimates higher than expected revenue drop (~50%) exacerbated the negative operating leverage effect. However, over recent past the key monitorable for MSS's stock has been greenfield plant loss trends which showcased marked improvement (Refer chart:1) even as revenues dropped (>40% QoQ). The key has been fixed-cost optimisation, productivity improvement during shutdown. We expect greenfield plants to turn EBITDA positive by Q4FY21. We continue to like MSS due to: a) its strong competitive position across regions, segments (M&HCV / PV / 2W) and products (interiors / exteriors / wiring harness); b) rising content per vehicle (e.g. wiring harness, mirrors) aiding gross margins; and c) non-linear improvement in earnings as greenfield plants turn EPS-accretive. Maintain BUY.

- Key highlights of the quarter: Overall consolidated revenues stood at Rs85bn (down ~49% YoY), dragged down by SMRPBV (down 50% to EUR731mn) and SMR (down 55% to ~EUR180bn). The standalone business reported a revenue decline of 76% at ~Rs4.4bn as margins slumped 4,332bps to -26.3%. SMP witnessed 1,096bps YoY contraction in reported margins at -8.3% while PKC reported 198bps decline at 8.1%. Consolidated net debt rose Rs2.16bn QoQ to Rs9bn in order to maintain sufficient cash for working capital while total liquidity remained flat at Rs100bn.

- Key takeaways from earnings call: a) Current capacity utilisation stands at ~80% as majority of the plants (~85%) globally are operating at more than 50% capacity; b) cashflow position declined in Q1 as working capital increased by Rs9bn and exchange rate fluctuation led to benefit of Rs1.8bn; c) the April-May lockdown period helped the company to focus on profitability in greenfield plants through re-layouting, reorganising and training of manpower, which are expected to expedite breakeven; d) SMP Kecskemet plant is expected to reach peak revenues in FY21; the Tuscaloosa plant is likely to peak in FY22 as focus on cost-cutting has led to ~30% headcount reduction; e) for PKC, China plants are operating at >100% capacity while Europe is recovering at a fast pace; and f) company has received grants for furlough benefits, which aided in maintaining debt levels; capex for FY21 is expected to be Rs20bn;.

- Maintain BUY: We revise our earnings growth estimates by -59% in FY21E due to Q1 impact and raise FY22E estimates by 2.2%. We continue to like the stock (even after the recently rally) as its FCF yield remains strong (~7%/12% in FY21E/22E respectively). We value MSS on SoTP basis and maintain our multiple for India at 24x while raising multiple for international subsidiaries to 14x (earlier: 12x) FY22E EPS considering improving outlook on greenfield plants. Maintain BUY with a revised target price of Rs126/share (earlier: Rs122).

Shares of MOTHERSON SUMI SYSTEMS LTD. was last trading in BSE at Rs.107.45 as compared to the previous close of Rs. 104.9. The total number of shares traded during the day was 2111264 in over 9240 trades.

The stock hit an intraday high of Rs. 109.3 and intraday low of 101.2. The net turnover during the day was Rs. 221787518.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Zydus Wellness - Leadership in niche categories; initiate at BUY - ICICI Securities

Power - Setting the stage - ICICI Securities

Company Update - Elgi Equipments - ICICI Securities

Nano Nivesh - The Anup Engineering - ICICI Securities

RBI OMO announcement of Rs. 10000 crore - Angel Broking

TCS deal win - Sep 24, 2020 - Angel Broking

View on Pre-Monetary Policy by Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank

US FDA approval to Zydus Cadila - Angel Broking

HDFC Securities Institutional Research Desk: Cement Sector Thematic - Spotting the sweet spot

Bharat Forge - Expectation hurdle remains steep - ICICI Securities


Mutual Fund Review - September, 2020 - ICICI Securities

UTI AMC announces IPO date - Angel Broking

Asian Paints - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Britannia Industries - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Hexaware Technologies (Not Rated): Hexaware accepts 475/share as final delisting price - ICICI Securities

CAMS IPO - Day 2 Subscription - Angel Boking

Chemcon Speciality Chemicals - IPO subscribed 12.62 times on second day - Angel Broking

General insurance - Fire, health remain growth drivers, rising Covid claims a concern - ICICI Securities

Supreme Industries - Perfect recipe for rerating; upgrade to BUY - ICICI Securities

Titan Company - Best positioned to gain from faster-than-expected recovery. Upgrade to ADD - ICICI Securities

Sector Update - Telecom - Sep 23, 2020 - ICICI Securities

Allcargo Logistics - Highlights of Blackstone deal - ICICI Securities

I-direct Instinct - Gokaldas Exports

Economy: RBI's trilemma: allows for INR strength - Kotak

HCL Technologies - Company Update - ICICI Securities

Chemcon Speciality Chemicals - IPO Review - ICICI Securities

Angel Broking - IPO Note - YES Securities

TCS - Announcement of its blockhchain based solutions on Microsoft Azure - Angel Broking

Amber Enterpirses acquire Sidwal - Angel Broking

Dixon Technologies - Buy - YES Securities

HCL Technologies acquisition of DWS Limited - Angel Broking

Allcargo Logistics CFO Resignation - Angel Broking

Upgrade to BUY on Gateway Distriparks - Strengthening the balance sheet - HDFC Securities

BUY on ITD Cementation - Execution pickup awaited - HDFC Securities

Allcargo Logistics - Trying to stich through an integrated offering - ICICI Securities

Polymer price tracker - Other polymer (ex-PVC) prices too firm up - ICICI Securities

Angel Broking - IPO Review - ICICI Securities

IPO Review - Computer Age Management Services - ICICI Securities

Company Update - EIH Ltd - ICICI Securities

Gladiator Stocks - Godrej Properties - ICICI Securities

Company Update - Dr Reddy's Laboratories - ICICI Securities

Gladiator Stocks: Pharma Thematic - ICICI Securities

Company Update - Housing & Urban Development - ICICI Securities

Covid Recovery Pulse - E-Way bill generation shows recovery signs with auto volumes flat - ICICI Securities

Quant Pick - UltraTech Cement - ICICI Securities

Lupin & Cipla - Positive News - Angel Broking

Sterling and Wilson Solar Ltd - 106.71 MW order win - Angel Broking

Dr. Reddy's Laboratories - Settles Revlimid litigation in US - ICICI Securities

Natco Pharma - Natco to launch first generic Revlimid - ICICI Securities

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019