We reiterate ‘buy’ on Motherson Sumi (MSS) with a revised fair value of R498 per share (earlier R231) as we roll forward our valuation and change our valuation methodology to one year forward.
MSS reported consolidated ebitda growth in Q2FY15 of 1% y-o-y (2% lower than our estimates) as revenue growth (11% y-o-y, 3% above our estimates) was offset by a lower ebitda margin of 9.1% (down 90 bps y-o-y and below our forecast of 9.6%). The standalone entity registered robust revenue growth of 14% y-o-y to R1270 crore despite sluggish passenger vehicles volumes in Q2FY15.
This was primarily driven by MSS wining orders from the recently launched successful new models (from Honda and Maruti). An increase in content per car, market share gains; and product mix change towards higher-value assemblies.
Adjusted ebitda margin stood at 18% (up 110 bps q-o-q and down 270 bps y-o-y; higher base), a tad below our expectation of 19%. However a lower effective tax rate (26%) resulted in adjusted PAT coming broadly in line with our estimates. We expect the standalone entity to deliver EPS CAGR 20% of over FY14-17e, led by strong revenue momentum and margin expansion driven by positive operating leverage and a favourable product mix change.
