Motherson Sumi Share price today: Prabhudas Lilladher maintains BUY rating with revised price target of Rs247 (vs Rs 203 earlier)

Motherson Sumi Share price today: The company's Q3 FY21 results were better with a sharp beat at EBITDA/PBT by 14%/42% led by sustained improvement in SMP’s greenfield plants and continued cost reduction in all global business. EBITDA grew 61% YoY to Rs 17.9 b with 14 quarter high margins at 10.5% (+310bp YoY). Execution of a strong order book and limited capex at SMPBV as well as India business augurs well for Motherson Sumi. The current market share price of Motherson Sumi is Rs 210 up Rs 13 or 7%,

Hence for FY22, Prabhudas Lilladher expects Motherson Sumi’s margins to sustain at an elevated level of 10% led by turnaround in green fields and cost efficiencies. Prabhudas Lilladher upgrades FY22/23 consol EPS by 13.2%/11.7% to factor in strong margins in all business. Prabhudas Lilladher maintains BUY with revised price target of Rs247 (vs Rs203) as they raise target multiple to 25x (in-line with 5yr LPA).

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Healthy order execution and greenfield turnaround drive all round beat for Motherson Sumi:

Motherson Sumi consolidated revenue grew 14% YoY at Rs 170.9 bn led by growth across business. EBITDA too came in better at Rs 17.9 bn (+61% YoY) led by turnaround at SMP’s greenfield and cost efficiencies. Better operating performance, higher minority share at Rs 4.4 bn and tax credit of Rs 1.1 bn led Adjustment. PAT beat at Rs 6.6 bn.
Consol net debt of Motherson Sumi further declined to Rs 62 bn in Q3 FY21 (v/s Rs 75 bn in Q2 FY21 and Rs 69 bn in Q4 FY20). This is the lowest debt level in 14 quarters.

Motherson Sumi Call takeaways:

1) Pure EV accounts for 21% of overall SMRP BV order book at Eur 13.1 mn as of Sep-20
2) Controlled capex at SMRP BV with total capex of Eur 95 mn in 9M FY21 (v/s Eur 175 mn in FY20)
3) SMR with 40%+ ROCE is targeting 50% ROCE. It can look at inorganic opportunities to grow its top-line. There are opportunities in markets like Japan where footprint of Mother Sumi is miniscule
4) SMP Greenfields – further scope left for efficiency and profitability improvement which can aid overall profits
5) Operations have normalized, with most facilities running at pre-covid levels. Not seeing cancellation of orders as yet
6) PKC- CV business started to pick up as demand is improving in NA and China
7) Capex for FY21 to remain lower than Rs20b while FY22 capex to remain at the same level. Current order book can be serviced from existing plants
8) Copper price inflation is largely pass through albeit with a lag of a quarter