IGI Logo

Revenue beat in India operations; EU impacted by chip shortage

The focus is on winning new orders in the EV space

* MACA’s strong performance in 3QCY21 was driven by strong revenue trajectory in its India operations, while its EU operations were affected by chip shortages and an adverse exchange rate. New order for EVs provides support against an expected loss of revenue growth in its ICE-dependent portfolio.

* We largely maintain our EPS estimates, despite good beat in 3QCY21, as we factor in the impact from semiconductor shortages. We maintain our Buy rating.

Strong all round performance led by beat in Indian operations

* Consolidated revenue grew 23% YoY (2% QoQ) to INR20.9b (est. INR19.5b) in 3QCY21, led by a beat in India operations.

* EBITDA margin expanded by 400bp YoY to 12.8% (est. 12.7%). EBIDTA grew by 78% YoY (3% QoQ) to INR2.7b (est. INR2.5b). Adjusted PAT grew 174% YoY (22% QoQ) to ~INR1.66b (est. ~INR1.14b) due to lower tax outflow, partially offset by lower other income.

* Revenue from the India business grew 33% YoY (22% QoQ) to INR11.4b (est. ~INR10.3b). EBITDA margin improved by 100bp YoY (140bp QoQ) to 13.6% (est. 13.4%).

* EU business revenue grew 13% YoY (-14% QoQ) to INR9.5b (est. ~INR9.2b). EBITDA margin improved 670bp YoY (-130bp QoQ) to 11.9% (est. 12%). Sales dropped sequentially due to seasonality in summer holidays and semiconductor shortages.

Highlights from the management commentary

* Growth forecast: It is expecting lower than expected sales in 4QCY21 (v/s earlier estimates) due to ongoing semiconductor shortage. However, it is optimistic about growth in both India and the European region during CY22 and CY23, subject to semiconductor availability.

* EV business: Metalcastello has secured an annual order for EVs worth EUR20m from an American customer. The same is expected to start by the end of CY22 and will peak in CY25. Bill Forge has also secured EV orders of a similar quantum for driveline products.

* Exports momentum is being impacted by high logistics cost and is expected to grow at a slower pace.

* The management expects CY21 capex to be ~INR4b. Going forward, it is expected to be ~5% of the revenue, with 100% of growth capex located in India.

Valuation and view

* MACA’s growth story is on track, driven by its organic initiatives (new products/customers). This, coupled with cost-cutting initiatives in both India and the EU, would drive margin expansion.

* Any significant order win or growth in the EV portfolio can act as a rerating factor. The stock trades at valuations of 16.9x/13.9x CY21E/CY22E consolidated EPS. We maintain our Buy rating with a TP of ~INR300/share (15x Sep’23E consolidated EPS).

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer