EUR 120.00 For Business Accounts Only

MOSL: MOTHERSON SUMI (Buy)-Below est; all-round miss due to cost inflation, op. deleverage

MOTHERSON SUMI: Below est; all-round miss due to cost inflation, op. deleverage

(MSS IN, Mkt Cap USD9.5b, CMP INR223, TP INR285, 28% Upside, Buy)

 

Underlying demand for PV / CV recovery remains strong

• Motherson Sumi (MSS)’s 1QFY22 performance was impacted by exogenous factors in all its businesses (COVID in India and supply-side issues in overseas businesses), sharp copper price inflation, and non-recurring expenses at PKC. While the near-term outlook is murky due to supply chain uncertainties, MSS is well-positioned to benefit from cyclical recovery in its key businesses as well as from the strong order book and improving efficiencies in SMRPBV.
• We cut our FY22E EPS estimates by 8%/3%, factoring in headwinds from the semiconductor shortage as well as copper cost inflation. Maintain Buy, with TP of INR285 (Sep’23-based SOTP).

 

Transitory impact of RM cost, one-offs at PKC hurt performance

• 1QFY22 consol (incl DWH) revenues / EBITDA / adj PAT declined 6%/27%/59% QoQ to INR168.5b/INR14.6b/INR2.9b.
• The India S/A business (incl DWH) declined 21% QoQ to INR18.2b (v/s est INR16b). EBITDA margins declined 4pp QoQ to 14.5% (v/s est 16.5%). Adj. PAT stood at ~INR1.8b (v/s est INR1.46b), registering decline of 26% QoQ.
• SMP revenues declined 5% QoQ (+71% YoY) to ~EUR944m (est. EUR992m). EBITDA margins contracted 140bps QoQ to 7.3% (v/s est 8.5%).