CMP 236.50

Target Price 262.00

ISIN: INE775A01035

MARCH 4th

, 2014

MOTHERSON SUMI SYSTEMS LTD

Result Update: Q3 FY14

BUYBUYBUYBUY

Stock Data

Sector Auto Components

BSE Code 517334

Face Value 1.00

52wk. High / Low (Rs.) 249.50/115.82

Volume (2wk. Avg ) 248000

Market Cap ( Rs in mn ) 208569.35

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY13A FY14E FY15E

Net Sales 256169.60 303828.27 349402.51

EBITDA 17981.80 26090.03 30953.27

Net Profit 4445.40 6706.50 7772.32

EPS 7.56 7.60 8.81

P/E 31.28 31.10 26.83

Shareholding Pattern (%)

1 Year Comparative Graph

MOTHERSON SUMI SYSTEMS LTD BSE SENSEX

SYNOPSIS

Motherson Sumi Systems Ltd (MSSL) is

considered among the largest auto ancillaries in

India, as part of one of the most diversified

groups in the Indian automotive industry with

an ever growing global presence.

Motherson Sumi Systems reports the best ever

performance for a quarter in terms of revenue,

EBITDA, PBT and PAT.

Consolidated net profit jumps to Rs. 2496.00 mn

against Rs. 1030.20 mn in Q3 FY13, an increase

of 142.28%.

Net Sales for the quarter stands up by 19.90% to

Rs. 79886.70 mn from Rs. 66625.90 mn, when

compared with the prior year period.

EBITDA is Rs. 7980.50 mn as against Rs. 4503.20

mn in the corresponding period of the previous

year.

EPS of the company stood at Rs. 2.83 a share

during the quarter, registering at 61.54%

increase over previous year period.

The company continues to get additional orders

and expand its operations globally in line with

requirements of its customers.

SMR and SMP further new orders worth of Euro

842 mn and Euro 1,763 mn in the current

financial year till H1 (13-14) respectively.

Net Sales and PAT of the company are expected

to grow at a CAGR of 33% and 78% over 2012 to

2015E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Motherson Sumi Systems Ltd. 236.50 208569.35 7.56 31.28 6.10 200.00

Bosch Ltd. 9165.65 288901.30 281.76 32.66 4.47 600.00

Exide Industries Ltd. 113.25 96475.00 5.90 19.24 2.82 160.00

Tube Investment of India Ltd. 185.90 42476.90 3.68 50.20 3.57 150.00

Recommendation & Analysis - ‘BUY’

Motherson Sumi Systems reports the best ever performance for a quarter in terms of revenue, EBITDA, PBT and

PAT. Total revenue up by 21%, PBT is up by 85% and PAT is up by 143%. Samvardhana Motherson Reflectec

(SMR) reports record operating performance. Net Sales for the quarter was to Rs. 79886.70 mn from Rs.

66625.90 mn, when compared with the prior year period. Net profit jumps to Rs. 2496.00 mn against Rs. 1030.20

mn in the corresponding quarter ending of previous year, an increase of 142.28%. Reported earnings per share

of the company stood at Rs. 2.83 a share during the quarter, registering at 61.54% increase over previous year

period. EBITDA is Rs. 7980.50 million as against Rs. 4503.20 million in the corresponding period of the previous

year.

The company has delivered its best ever results in revenues as well as operating margins for a quarter. This is

exceptional performance both in domestic and overseas businesses in current market conditions. SMR and SMP

continue to grow and deliver improved results. The company continues to get additional orders and expand its

operations globally in line with requirements of its customers. Over FY2012-15E, we expect the company to post

a CAGR of 33% and 78% in its top-line and bottom-line respectively. Hence, we recommend ‘BUY’ for

‘Motherson Sumi Systems Ltd’ with a target price of Rs. 262.00 for medium to long term investment.

Investment Highlights CONSOLIDATED

Results updates- Q3 FY14,

Months Dec-13 Dec-12 % Change

Net Sales 79886.70 66625.90 19.90

PAT 2496.00 1030.20 142.28

EPS 2.83 1.75 61.54

EBITDA 7980.50 4503.20 77.22

The company’s net profit jumps to Rs. 2496.00 million against Rs. 1030.20 million in the corresponding quarter

ending of previous year, an increase of 142.28%. Net sales for the quarter stands up by 19.90% to Rs. 79886.70

million from Rs. 66625.90 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs. 2.83 a share during the quarter, registering at 61.54% increase over previous year period.

EBITDA is Rs. 7980.50 million as against Rs. 4503.20 million in the corresponding period of the previous year.

Expenditure:

Break up of Expenditure

In Rs. Millions

Q3 FY14 Q3 FY13

Cost of Material consumed 50971.50 41256.10

Other Expenditure 8821.00 7750.90

Purchase of Stock in Trade 228.40 874.20

Employee Benefit Expenses 12725.80 11026.60

Depreciation & Amortization Expense

2174.30 1961.20

Segment Revenue

Latest Updates

• MSSL reports the best ever performance for a quarter in terms of revenue, EBITDA, PBT and PAT. Total

revenue up by 21%, PBT is up by 85%, PAT is up by 143%.

• The company continues to get additional orders and expand its operations globally in line with requirements

of its customers.

• Samvardhana Motherson Reflectec (SMR) further new orders worth Euro 842 million in the current financial

year till H1 (13-14) and Samvardhana Motherson Peguform (SMP) further new orders worth Euro 1,763

million in the current financial year till H1 (13-14).

Company Profile

Motherson Sumi Systems Limited (MSSL) is the flagship company of the Samvardhana Motherson Group,

established in 1986. It is a joint venture between Samvardhana Motherson Group and Sumitomo Wiring

Systems (Japan). MSSL is a focused, dynamic and progressive company providing customers with innovative

and value-added products, services and solutions. The acquisition of mirror business from Visiocorp (now

renamed as Samvardhana Motherson Reflectec) and Peguform (now named Samvardhana Motherson

Peguform) has helped MSSL evolve as one of the world’s leading manufacturers of automotive rear view

mirrors and a leading manufacturers of instrument panels, bumpers and door trims in Europe. With a diverse

global customer base comprising of almost all leading automobile manufacturers globally, the company has a

presence in 25 countries across six continents.

The company’s ability to be a one-stop solution for its customers is further strengthened by its manufacturing

presence across Asia, Europe, North America, South America, Australia and Africa. The geographic spread of its

manufacturing bases, design centers, logistics centers, marketing support and sourcing hubs allows MSSL the

flexibility to supply to its customers from various manufacturing locations using the best suited logistics model.

Products

The company manufactures a range of harness such as

• Automotive Rear View Mirrors

• Wiring Harnesses

• Injection Moulded Products

• Blow Moulded Products

• Liquid Silicone Rubber Moulded

Components

• Injection Moulding Tools

• Extruded Rubber Products

• Precision Machined Metal Components

Samvardhana Motherson International Limited (SMIL)

Samvardhana Motherson International Limited (SMIL) is the principal holding company of Samvardhana

Motherson Group. The Company undertakes the provision of design and manufacturing solutions, mainly to the

automotive industry, through subsidiaries and joint ventures with partners in the relevant & fields. It acts as the

central company that binds and manages the different ventures of the Group. SMIL has investments in the Group

companies including in the (flagship company of the Group, Motherson Sumi Systems Limited (MSSL). SMIL

provides central support, strategy and management direction to all the other Group companies.

SMIL has its operations spread across the globe with over 140 manufacturing facilities and 34 engineering and

design centers with a presence in 25 countries across the world and expanding globally continuously. SMIL has

customers spread across multiple geographies. SMIL has successfully forged partnerships with global

technological leaders and has 24 JV partners. The Company holds 36.12% of the equity share capital of

Motherson Sumi Systems Limited (MSSL).

Samvardhana Motherson Reflectec (SMR)

Samvardhana Motherson Reflectec (SMR), a leading global tier 1 supplier of automotive rearview mirrors to the

automotive industry, has provided MSSL with a strong base for partnerships with global customers. SMR

develops and produces exterior mirrors for passenger cars, commercial vehicles and heavy trucks and is an

expert for camera based sensing system in the automotive industry. SMR’s global customer base includes all

major car makers in North America, South America, Europe, Asia and Australia. With a global market share of

22% in passenger cars and commercial vehicle segments, exterior mirrors are the Company‘s largest product

segment. SMR is now working towards the launch of its first programme for mirror components in South Africa,

in a MSSL plant in 2013.

Samvardhana Motherson Peguform

Samvardhana Motherson Peguform (SMP) is MSSL’s largest subsidiary. It was created through the acquisition of

former Peguform Group jointly by MSSL and SMIL in 2011. The company is headquartered in Germany, with a

global presence.

SMP is an established global tier 1 manufacturer of polymer-based automotive global modules specialising in

high quality interior and exterior products for the automotive industry. The company is a full systems solutions

provider of plastic parts right from design and concept development, product development to simulation, testing

to fully integrated mass production of modules. SMP is one of the largest manufacturers of bumpers, rocker

panels, instrument panels, interior door panels and other related products for the European automotive industry.

With numerous patented technologies and industry first innovations in all product lines, it is one of the most

preferred suppliers for car makers in Europe as well as to their facilities in China, Brazil and Mexico. SMP’s major

customers are Audi, BMW, Daimler, GM, Porsche, Renault/Nissan, Seat, Volkswagen, etc.

Sumitomo Wiring Systems, Ltd.

Motherson’s relationship with SWS began in 1983 with a technical agreement which was further strengthened

with the formation of Motherson Sumi Systems Limited (MSSL) as a joint venture in 1986. MSSL was setup to

manufacture wiring harnesses and wiring harness components.

Sumitomo Wiring Systems (SWS) is a 100% subsidiary of Sumitomo Electric Industries (Japan). SWS is one of the

global technology leaders in manufacturing of wire harnesses as well as components and wires. It has the

second-highest market share of wire harnesses worldwide.

Financial Highlight CONSOLIDATED (A*- Actual, E* -Estimations & Rs. In Millions)

Balance sheet as at March31st, 2012-2015E

FY-12A FY-13A FY-14E FY-15E

SOURCES OF FUNDS

Shareholder's Funds

Share Capital 388.00 588.00 881.90 881.90

Reserves and Surplus 18325.00 22302.00 28912.00 36684.32

1. Sub Total - Net worth 18713.00 22890.00 29793.90 37566.22

2. Share Capital Suspense account 4.00 0.00 0.00 0.00

3. Minority interest 5027.00 4025.00 5650.60 6678.18

Non-Current Liabilities

Long term borrowing 29611.00 27159.50 31505.02 34970.57

Deferred Tax Liability (net) 1506.40 1441.20 1715.03 1937.98

Other Long term liabilities 1640.50 2388.10 2698.55 2968.41

Long term Provisions 1099.50 1679.30 2132.71 2431.29

4. Sub Total - Non-Current Liabilities 33857.40 32668.10 38051.31 42308.25

Current Liabilities

Short term borrowings 11678.20 13552.60 15856.54 17442.20

Trade payables 30981.20 31808.00 35624.96 38474.96

Other Current liabilities 16789.80 19756.30 23905.12 26773.74

Short term Provisions 3511.90 3575.50 2717.38 2853.25

5. Sub Total - Current Liabilities 62961.10 68692.40 78104.01 85544.14

Total Liabilities (1+2+3+4+5) 120562.50 128275.50 151599.82 172096.79

APPLICATION OF FUNDS

Non-Current Assets

Fixed Assets

Tangible assets 45077.00 50563.00 57136.19 62849.81

Intangible assets 1845.00 2207.00 2626.33 3020.28

Capital Work in Progress 4444.00 3855.00 4240.50 4579.74

Intangible assets under development 14.00 4.20 4.70 5.17

a) Sub Total - Fixed Assets 51380.00 56629.20 64003.02 70449.83

b) Non Current Investments 937.90 716.20 823.63 914.23

c) Long Term loans and advances 1555.00 1506.50 2636.38 3216.38

d) Deferred Tax Asset 903.80 881.70 1243.20 1429.68

e) Other non-current assets 1394.90 1354.30 1828.31 2157.40

6. Sub Total - Non-Current Assets 56171.60 61087.90 70534.53 78167.51

Current Investment 0.40 0.40 0.43 0.47

Inventories 22496 26036.10 34367.65 41811.55

Trade receivables 30127.00 29400.30 30105.91 31611.20

Cash and Bank Balances 4557.00 5944.10 9510.56 12363.73

Short-terms loans & advances 7209.00 5804.70 7075.54 8136.87

Other current assets 1.50 2.00 5.20 5.46

7. Sub Total - Current Assets 64390.90 67187.60 81065.29 93929.28

Total Assets (6+7) 120562.50 128275.50 151599.82 172096.79

Annual Profit & Loss Statement for the period of 2012 to 2015E

Value(Rs.in.mn) FY12A FY13A FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 149075.80 256169.60 303828.27 349402.51

Other Income 135.10 169.50 190.60 205.85

Total Income 149210.90 256339.10 304018.87 349608.35

Expenditure -138840.20 -238357.30 -277928.84 -318655.09

Operating Profit 10370.70 17981.80 26090.03 30953.27

Interest -1648.50 -2494.60 -2804.78 -3085.26

Gross profit 8722.20 15487.20 23285.24 27868.00

Depreciation -3796.40 -7145.10 -8086.64 -8895.31

Exceptional Items -809.20 0.00 0.00 0.00

Profit Before Tax 4116.60 8342.10 15198.60 18972.70

Tax -2153.10 -3835.10 -5846.18 -7892.64

Profit After Tax 1963.50 4507.00 9352.42 11080.06

Minority Interest 631.20 -70.30 -2648.18 -3310.22

Share of Profit & Loss Of Asso. 1.70 8.70 2.26 2.48

Net Profit 2596.40 4445.40 6706.50 7772.32

Equity capital 392.00 588.00 881.90 881.90

Reserves 18228.60 22205.50 28912.00 36684.32

Face value 1.00 1.00 1.00 1.00

EPS 6.62 7.56 7.60 8.81

Quarterly Profit & Loss Statement for the period of 30th June, 2013 to 31st March, 2014E

Value(Rs.in.mn) 30-Jun-13 30-Sep-13 31-Dec-13 31-Mar-14E

Description 3m 3m 3m 3m

Net sales 70826.00 72430.00 79886.70 80685.57

Other income 42.70 48.40 48.30 51.20

Total Income 70868.70 72478.40 79935.00 80736.77

Expenditure -66303.10 -66650.80 -71954.50 -73020.44

Operating profit 4565.60 5827.60 7980.50 7716.33

Interest -765.70 -661.40 -702.90 -674.78

Gross profit 3799.90 5166.20 7277.60 7041.54

Depreciation -1839.00 -2029.50 -2174.30 -2043.84

Profit Before Tax 1960.90 3136.70 5103.30 4997.70

Tax -976.80 -1304.60 -1565.70 -1999.08

Profit After Tax 984.10 1832.10 3537.60 2998.62

Minority Interest -251.60 -436.30 -1042.70 -917.58

Share of Profit & Loss of Asso. -0.50 0.50 1.10 1.16

Net Profit 732.00 1396.30 2496.00 2082.20

Equity capital 588.00 587.90 881.90 881.90

Face value 1.00 1.00 1.00 1.00

EPS 1.24 2.38 2.83 2.36

Ratio Analysis

Particulars FY12A FY13A FY14E FY15E

EPS (Rs.) 6.62 7.56 7.60 8.81

EBITDA Margin (%) 6.96% 7.02% 8.59% 8.86%

PBT Margin (%) 2.76% 3.26% 5.00% 5.43%

PAT Margin (%) 1.32% 1.76% 3.08% 3.17%

P/E Ratio (x) 35.71 31.28 31.10 26.83

ROE (%) 10.54% 19.77% 31.39% 29.49%

ROCE (%) 23.65% 39.57% 44.30% 44.29%

Debt Equity Ratio 2.22 1.79 1.59 1.40

EV/EBITDA (x) 12.48 9.67 9.45 8.03

Book Value (Rs.) 47.50 38.76 33.78 42.60

P/BV 4.98 6.10 7.00 5.55

Charts

Outlook and Conclusion

� At the current market price of Rs.236.50, the stock P/E ratio is at 31.10 x FY14E and 26.83 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.7.60 and Rs.8.81

respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 33% and 78% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 9.45 x for FY14E and 8.03 x for FY15E.

� Price to Book Value of the stock is expected to be at 7.00 x and 5.55 x respectively for FY14E and FY15E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.262.00 for Medium to Long term

investment.

Industry Overview

The automotive industry occupies a significant place in the Indian economy. The well developed industry acts as

a catalyst and gives impetus to the economic growth by producing numerous vehicles. It is also widely preferred

by major industrial players for supply of auto components. The Indian auto component sector covers a wide

range of industries.

India is emerging as a global hub for auto component sourcing and is set to break into the league of the top five

vehicle producing nations worldwide. The country is also emerging as a sourcing hub for engine components.

Major global original equipment manufacturers (OEMs) plan to make India a component sourcing hub for their

global operations.

Market Structure

The Indian auto component industry's turnover is projected to touch US$ 115 billion by 2020-21. The industry is

estimated to grow at a compound annual growth rate (CAGR) of 14 per cent during 2013-21. In addition, the

industry's exports are projected to touch US$ 30 billion by 2020-21, according to Automotive Component

Manufactures Association (ACMA).

India: The Global Auto Hub

• The automotive supplier firm Cooper Standard inaugurated a manufacturing facility at Bawal in Haryana,

which will initially manufacture rubber sealing and trims for Volkswagen models in India, at an

investment of around US$ 7 million. The total estimated market for sealing and trim in India is estimated

to reach US$ 180 million and fuel and brake delivery market is estimated to be worth US$ 125 million.

• NMB-Minebea India Pvt Ltd, a wholly-owned subsidiary of Minebea Co Ltd (Minebea), announced

commencement of its operations in Gurgaon, India. The component maker foresees large market

potential for its products range

• Tenneco, a US$ 7.4 billion firm headquartered in Lake Forest-Illinois in the US, opened its DynaChrome

high speed hard chromium plating facility for piston rods at its Hosur plant in Tamil Nadu (TN)

• Malaysia's Petronas is setting up a lubricants' plant near Mumbai with the aim of capturing a greater

share of the growing Indian lubes market that is expected to touch nearly US$ 8 billion by 2017. India is

the fifth largest lubricants market in the world

• Tide Water Oil has decided to re-launch the brand Veedol in European markets, including Germany,

Austria and Switzerland

The cumulative FDI inflow into the Indian automobile industry during April 2000 to July 2013 was recorded at

US$ 8,932 million, amounting to 4.5 per cent of the total FDI inflows (in terms of US$), as per data published by

Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce, Government of India.

Key Developments & Investments

• Anand Automotive plans to invest Rs 1,200 crore (US$ 194.45 million) over the next five years on new

product development and capacity expansion

• Base Batteries plans to spend Rs 1,000 crore (US$ 162.07 million) over four years to set up new plants

and expand existing ones at Hosur, TN and Solan, Himachal Pradesh. The organised automobile batteries

market is estimated at Rs 4,000 crore (US$ 648.28 million)

• KLT Automotive & Tubular Products, manufacturers of chassis and related components, will invest over

Rs 320 crore (US$ 51.86 million) in setting up two chassis manufacturing units in Chennai and Sri City

and will also expand their existing unit.

• ARaymond inaugurated its first plant in India, at Chakan, Pune with an investment of US$ 7 million. The

new plant will manufactures various plastic fasteners like rib locks, trim clips, cable straps etc. All these

components will primarily cater to the Indian and global passenger car and utility car segment

• Greaves Cotton Ltd will supply single cylinder diesel engines to power TVS Motor's three-wheeler auto-

rickshaws

Government Initiatives

The Union Budget 2013-14 presented by Mr P Chidambaram, the Union Finance Minister, Government of India,

had a few add-ons for the industry.

• The period of concession available for specified part of electric and hybrid vehicles till April 2013 has

been extended upto March 31, 2015

• The basic customs duty (BCD) on imported luxury goods such as high-end motor vehicles, motor cycles,

yachts and similar vessels was increased. The duty was raised from 75 percent to 100 percent on cars/

motor vehicles (irrespective of engine capacity) with CIF value more than US$ 40,000; from 60 percent to

75 percent on motorcycles with engine capacity of 800 cc or more and on yachts and similar vessels from

10 percent to 25 percent

• An increase in excise duty from 27 to 30 per cent has been allowed for SUVs with engine capacity

exceeding 1,500 cc, while excise duty was decreased from 80 to 72 per cent, in case of SUVs registered

solely for taxi purposes

• An exemption from BCD on lithium ion automotive battery for manufacture of lithium ion battery packs

for supply to manufacturers of hybrid and electric vehicles

• The excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14 per cent to 13

per cent

Additionally, the Automotive Mission Plan (AMP) 2006-2016, aim to develop India as the destination of choice in

the world for design and manufacture of automobile and auto components, with output reaching US$ 145 billion.

Road Ahead

The ever increasing development in infrastructure, huge domestic market, increasing purchasing power and

stable government framework have made India a favourable destination for investment, as per the vision of AMP

(2006-2016).

Over the medium term, factors such as growing thrust on localisation and expanding businesses in new

geographies should allow the components industry to grow at a relatively faster pace than the auto OEM

segment.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

C.V.S.L.Kameswari Pharma

U. Janaki Rao Capital Goods

B. Anil Kumar Auto, IT & FMCG

Suhani Adilabadkar Pharma & Banking

M. Vinayak Rao Diversified

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