Motherson Sumi Stock Jumps To Highest In More Than Two Years On Q3 Results Beat, Debt Reduction
A worker assembles a mold at the Motherson Sumi Systems Ltd. injection molding plant in Noida, India. (Photographer: Brent Lewin/Bloomberg)  

Motherson Sumi Stock Jumps To Highest In More Than Two Years On Q3 Results Beat, Debt Reduction

Shares of Motherson Sumi Systems Ltd. reversed losses to rise to the highest in more than two years as profit and revenue surged in the third quarter and debt reduced.

Net profit of the auto parts maker—which counts Audi AG, Daimler AG and Volkswagen AG as its top customers—jumped nearly fourfold over the year earlier to Rs 1,268.3 crore in the October-December period, according to an exchange filing. That compares with the Rs 440.4-crore consensus estimate of analysts tracked by Bloomberg.

The company has also received a tax credit of Rs 109.2 crore during the reported quarter compared with a tax expense of Rs 97 crore a year ago.

“Operations have normalised, with most facilities running at pre-Covid levels,” the company said in the filing.

Q3 Results: Other Highlights (Year-On-Year)

  • Revenue rose 15% to Rs 17,092.4 crore, compared with the estimated Rs 16,624.1 crore.
  • Operating profit rose 61% to Rs 1,795.5 crore, against the projected Rs 1,576.9 crore.
  • Margin expanded 310 basis points to 10.5%. Analysts had pegged the metric at 9.5%.

Sustained improvements were seen in the performance of greenfield plants with a continued focus on cost reduction and efficiency improvements, the filing said.

“With the rollout of a Covid vaccine in different parts of the world, we are optimistic that the demand and positive sentiments will improve in the upcoming quarters,” Chairman Vivek Chaand Sehgal was quoted as saying in the filing.

Motherson Sumi, which is one of the world’s largest makers of automotive wiring harnesses and mirrors for passenger cars, has also managed to reduce its gross debt to Rs 11,292 crore from Rs 11,790 crore as of March 2020. Its net debt is down to Rs 6,206 crore from Rs 6,917 crore as of March, on a consolidated basis. “With strong operating cash flows, net debt is lowest compared to the previous 14 quarters,“ it said.

Key Segmental Highlights (Year-On-Year)

  • Domestic wire harness business revenue up 44% to Rs 1,343 crore, while Ebitda increased 62% to Rs 202 crore.
  • Revenue for Samvardhana Motherson Automotive Systems Group BV—joint venture between Motherson Sumi and Samvardhana Motherson International Ltd.—up 3% at 1,450 million euros. Its Ebitda rose 69% to 147 million euros.
  • Samvardhana Motherson Reflectec revenue up 2% at 385 million euros. Its Ebitda rose 24% to 51 million euros.
  • Samvardhana Motherson Peguform revenue up 4% at 1,064 million euros. Its Ebitda doubled to 101 million euros.
  • PKC revenue and Ebitda flat at 286 million euros and 27 million euros, respectively.

Shares of Motherson Sumi gained as much as 8.5% as of 12:30 p.m. to Rs 194.6 apiece — the highest since September 2018. The stock is up for the third straight session.

Of the 30 analysts tracking the company, 21 have a 'buy' rating, eight suggest a 'hold' and one recommends a 'sell', according to Bloomberg data. The stock is trading 9.5% higher than its 12-month consensus price target of Rs 165.7.

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