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MSUMI reported another quarter of strong double-digit revenue growth (up 14% YoY; ahead of consensus estimates), outpacing the 3% PV industry production growth on strong content rise and market share gains, driven by its presence in majority of the new model launches. A sharp 260bps QoQ rise in staff costs (on hiring at new greenfields ahead of the SOPs) hit profitability as EBITDAM fell by 100bps QoQ to 9.8% (ex-greenfields EBITDAM: 11.8%). Per the management, margins are expected to improve as utilization levels enhance at the 3 new greenfields; these combined are expected to contribute another Rs21bnpa on full ramp-up. The Pune and Gujarat plant (one phase) are set to ramp up from Q2, with the Kharkhauda plant on track to commercialize from Q2. Certain SOPs pertaining to the Gujarat plant have been deferred to Q4FY26 (vs earlier guidance of Q2FY26) due to delay in OEM model launch. We cut FY26E/27E EPS by 11%/6% to factor in the delayed ramp-up and front-loading impact (higher employee cost) from greenfields; margin expansion remains contingent on improved utilization (of these plants), which in turn is dependent on the success of key customer OEM EV models. We retain ADD with unchanged TP of Rs40 (Rs60 earlier; adjusted for the bonus issue) at 28x Jun-27E PER.

Revenue growth ahead of expectations; profitability ex-greenfield plants intact

MSUMI logged 14% YoY revenue growth, outpacing the 3% PV industry production growth, led by strong content growth and presence in new model launches; Ex of new greenfields, revenue growth stood at 7.2%. EBITDA grew 2.3% YoY to Rs2.3bn, with EBITDAM down 100bps QoQ to 9.8% on higher employee costs (up by 260bps QoQ) from new greenfields; ex of greenfields, EBITDAM stood at 11.8% (flattish YoY). PAT was down 4% YoY, largely due to higher depreciation, with PATM at 5.7% (down by 90bps QoQ). Earnings call KTAs

1)The mgmt highlighted sustained outperformance vs the underlying industry (revenue up 14% YoY vs 3% PV industry production growth), led by a combination of favorable volume, content mix, and increasing content/vehicle and presence across majority of the new launches by OEMs. 2) Employee costs rose sharply in Q1 due to greenfields, as major hiring was undertaken for training and upskilling to ensure readiness ahead of SOPs. 3) As new programs are commissioned and volumes ramp up, employee costs could rise further. Combined manpower across the three greenfield plants is estimated at 7-7.5k once volumes reach projected levels. Currently, volumes are below that threshold, and headcount is somewhere in between. 4) The SOPs for EVs at the Pune/Gujarat plant commenced in Q4FY25/Q1FY26; volume ramp-up is expected from Q2FY26. SOPs for certain models (ICE+EV) at the Gujarat plant have been deferred to Q4FY26 (vs earlier expectation of Q2FY26) due to delays in model launches by the OEM. The Kharkhauda (Haryana) plant is on track to commence from Q2FY26. 5) Per the management, the content/vehicle in E-PVs is 1.5-1.7x higher vs ICE PVs. 6) MSUMI is collaborating with 2W/CV OEMs and anticipates breakthrough in upcoming models across both categories. 7) FY26 capex guidance at Rs2bn is basis volume projections of the OEMs.

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