Motherson Sumi’s (MSS) Q1FY17 adjusted EBITDA of Rs 9.3 billion (up 20% y-o-y) came 4% below our estimate due to lower than expected SMR/SMP revenues. Key highlights: SMRPBV disappointed on revenue and margin fronts largely due to SMR; net debt in SMRPBV increased q-o-q and y-o-y, indicating investment phase of the business; and India business outlook continues to improve. We maintain hold with SoTP-based target price of `309 (standalone: 25x versus 22x earlier, both SMR and SMP: 12x FY18E PER) versus `280 earlier.
Consolidated revenue (adjusted for IND·AS impact) at `105 billion (up 15% y-o-y) was 2% below our estimate due to weaker·than·expected revenue in SMR and SMP. In EUR terms, SMR and SMP revenue grew 7% and 13% y-o-y (15% and 18% y-o-y in FY16), respectively. India business surprised positively with 18% y-o-y revenue jump, led by higher share of new models and rising content per vehicle.
India revenue grew 18% y-o-y versus 13% y-o-y growth in Q4FY16. We believe India can maintain the momentum as market share loss phase is behind. In SMR/SMP, ramp up of new plants from H2 remains key to revenue growth and margin improvement, else there is a risk to our 10%/13% FY17E revenue growth in turn affecting margins. We expect India business revenue growth to be higher than volume growth due to higher content per vehicle in new models.