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Motherson Sumi Systems’ (MSS’) Q4FY21 working earnings had been according to consensus estimates as Ebitda margin got here in at 10.1% (up 154bps y-o-y). Nonetheless, FCF technology for FY21 positively stunned consensus at ~Rs 30.3 bn resulting in web debt discount (ex-leases) at Rs 48 bn (down ~Rs 21 bn y-o-y/ lowest ever debt/Ebitda: 1.2x). Administration expects SMP’s greenfield crops to achieve PBT breakeven quickly (we count on FY22); that is more likely to enhance earnings progress in FY23.
DWH enterprise is more likely to unlock worth (publish restructuring) as among the best proxies of electrification/hybrid theme in India. Japanese partnership, technological power and top-quartile financials are more likely to create shortage premia for it. General, we proceed to love the FCF technology assemble; inventory stays engaging with FCF yield of ~4%/6%/11% for FY21/FY22/FY23, respectively. Preserve Purchase.
Key highlights of the quarter: General consolidated revenues stood at ~Rs 169 bn (up ~18% y-o-y) led by PKC (up ~27% in EUR phrases). The standalone enterprise reported income progress of ~28% to ~Rs 12.7 bn as margins had been decrease at 13.7% (down 78bps) attributable to quarter lag of RM pass-through. PKC and SMR witnessed 15bps and 166bps y-o-y contraction in reported margins at 8% and 12.9%, respectively, whereas SMP reported 411bps growth at 8.7%. Robust cashflows aided debt discount (web debt down by ~Rs 14 bn q-o-q).
Key takeaways from earnings name: (i) Orderbook dimension reached EUR15.6 bn (25% from EVs) with EUR4.5 bn of recent orders in H2FY21; EV order execution to be ramped up as buyer programmes collect tempo; (ii) SMRPBV witnessed robust working capital enchancment (down from 11 to five days); general capex for MSS to be Preserve Purchase: The sturdy orderbook progress (20% bounce over H1FY21) at EUR15.6 bn rising BEV content material (share of pure BEV orderbook at 25% vis-a-vis 21% in H1), is more likely to assist content material per car enhance thesis.
The present crops could be ample to execute this increasing orderbook, thus resulting in quicker asset-sweating and RoCE enchancment. We revise our earnings estimates by -0.7%/5.1% for FY22E/FY23E. We worth the corporate on SOTP foundation, with a revised TP of Rs 310/share (earlier: Rs 253).