Add Motherson Sumi Wiring India Ltd For Target Rs 45 By Emkay Global Financial Services Ltd
MSUMI’s Q4 results were a mixed bag, with revenue growth accelerating for the 5 th consecutive quarter at ~33% YoY (~29% YoY growth, adjusted for copper price movement; Exhibit 7) vs 12% PV industry production growth. EBITDA missed estimates (~4%/11% below the street/our estimates), with EBITDAM down by ~143bps QoQ to 8.2%, led by the persisting copper price inflation (complete pass-through with a 3M-6M lag), per the management. The rise in copper prices over recent quarters has been passed-on while current quarter’s commodity impact should reflect in H1FY27 numbers. While Kharkhoda/Gujarat (greenfields) are at ~80%/60% capacity utilization and tracking as planned, Pune is still at 50% as a customer postponed its model launch. The three greenfields have combined revenue capability of ~Rs20bnpa at full capacity (Q4 run-rate already at ~Rs4.4bn). The management expects greenfields to ramp up gradually over the next few quarters (expects FY27 to be a strong year). We slightly tweak our EPS estimates, by ~1% for FY27E/28E. We retain ADD on MSUMI, with unchanged TP at Rs45, on 30x Mar-28E PER.
Revenue growth accelerates; margin hit by timing gap in passing-on costs
Revenue was up 33% YoY (11%/5% beat on street/our estimate) and was ahead of the 12% PV production growth, led by increase in premiumization, volume growth, and presence in new model launches. EBITDA at Rs2.74bn was ~4%/11% below street/our estimates, with EBITDAM down by ~143bps QoQ to ~8.2% led by impact from the rise in copper prices. Ex-greenfields, EBITDAM was 10% (down by 138bps QoQ). Adjusted PAT rose ~1% YoY to ~Rs1.67bn.
Earnings call KTAs
1) MSUMI continues to win orders across powertrains (ICE, hybrid, EV models) and expects Q4 momentum to remain strong going into Q1/FY27, with continued outperformance vs the auto industry, given multiple plants coming online this year.
2) MSUMI highlighted that standard practice is to expand capacity as soon as a plant hits 80% capacity utilization, backed by definite customer commitments.
3) On greenfields, Kharkhoda is running at ~80% capacity utilization and tracking to plan, Gujarat (Navagam) is at 60% with one model now ramping up and volumes expected to improve over coming ~1-2Qtrs, while Pune is at only 50% as a customer has postponed a model launch. The 3 greenfields have total revenue capability of ~Rs20bnpa at full ramp-up and should start logging similar margins to overall margins.
4) While gross margin reduced by ~600bps QoQ, mainly driven by copper (~24-28% contribution to the RM cost base), the mgmt highlighted that the pass-on arrangement is back-to-back (~3-6M lag), and currency also is a pass-on (1Q lag). The recovery lag translated into a ~2-2.5% PAT hit in Q4, though the mgmt expects the Q4 cost hike to be largely offset in H1FY27.
5) FY26 capex was ~Rs1.9bn and FY27 guidance is similar at Rs2bn, split between greenfields, capacity expansion, automation, digitization, and replacement spending.
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