Tonnage declined ~15% y-o-y (-6% q-o-q) to 46,200MT, implying negative growth for the fourth consecutive quarter. Realisations, however, improved 4.7% q-o-q (-6.4% y-o-y) to R193/kg, led by higher exports and commodity price increases. Net revenues of R8.9 billion (est. of R9.5 billion) were down 20.6% y-o-y (-1.5% q-o-q). Export revenues declined 30% y-o-y, but grew 11% q-o-q. Domestic revenues declined 15% y-o-y. Non-auto revenues fell 27% y-o-y (exports down 45% y-o-y), while auto revenues declined 10% y-o-y (exports down 22% y-o-y). EBITDA margin of 27.8% (in-line) expanded 80bp q-o-q (-80bp y-o-y), with management’s focus on manpower and cost rationalisation yielding results. PAT declined 26% y-o-y (+4% q-o-q) to ~R1.2b (est. of R1.4b).
Key highlights from the earnings call: a) Expects improving scenario in the US for Cvs (aided by market share gain) and bottoming out of the oil & gas and other industrial segments. b) Expects M&HCV segment in India to post strong growth in H2. c) PVs: Two new customers added in the domestic business, with revenues up 30% y-o-y. Cutting earnings; maintaining buy with TP of `1,017: We lower our EPS for FY17E/FY18E by 5%/4%, factoring in possibly slower-than-expected recovery in export markets and lower M&HCV volumes in India. Valuations at 23.8x/23.7x FY18E/FY19E consolidated EPS fully reflect current weakness, but do not factor in high-potential businesses seeded over last two years.