Buy Motherson Sumi Wiring India Ltd For Target Rs. 70 By JM Financial Services
Margins in line; Plant ramp-up remains crucial for margin recovery
In 4QFY25, Motherson Sumi Wiring India (MSUMI) reported revenue growth of 12% YoY, 2% above JMFe. EBITDA margin stood at 10.8%, in line with JMFe. 220bps YoY decline in margins was primarily due to start-up costs related to the new greenfields . Excluding the greenfield costs, EBITDA margin stood at 12.4%. Rising features led premiumisation and gradual shift towards EVs (incl. Hybrids) remain the key levers for higher content per vehicle. While the new capacity addition is expected to support medium-term growth, the on-going slowdown in the domestic PV segment in likely to weigh on near-term revenue growth. Margins are expected to remain under pressure until the new greenfield facilities achieve full ramp-up. We have cut our revenue growth estimates from 17% / 15% to 13% each in FY26E / FY27E. We have also reduced our EPS estimates by 12% / 13% for FY26E / FY27E from our previous estimates. We ascribe 35x PE to arrive at Mar’27 fair value of INR 70. Maintain BUY.
* 4QFY25 – Reported margin in line with estimates: MSUMI reported revenue of INR 25.1bn (+12% YoY, +9% QoQ), 2% above JMFe. Reported EBITDA margin stood at 10.8% (-220bps YoY, +50bps QoQ), in line with JMFe. YoY decline in margins was primarily due to start-up costs related to the new greenfields. EBITDA margin (exGreenfields) stood strong at 12.4%. Reported EBITDA came-in at INR 2.7bn (-7% YoY, +14% QoQ), 2% above JMFe. PAT stood at INR1.6bn (-14% YoY, +18% QoQ).
* Demand Outlook: In 4QFY25, MSUMI’s revenue grew by c.12% YoY, outperforming the underlying industry, led by higher content per vehicle. Revenue contribution from EV stood at 4% during the quarter. The company commenced operations at its Pune greenfield facility (EV) during 4QFY25. Two additional greenfields (ICE and EV) are expected to be commissioned by 2QFY26. Collectively, these three greenfields have a peak annual revenue potential of INR 21bn and are expected to ramp up to optimal capacity in 2HFY26. The Gujrat greenfield facility’s SOP has been delayed due to launch postponement by the customer. Management reaffirmed that the company remain engaged across all powertrain technologies.
* Margin outlook: Gross margin declined 60bps QoQ to 34.3%, impacted by an adverse product mix and elevated copper prices. However, MSUMI has pass-through arrangement with OEMs for change in copper prices, with a quarter/half-yearly lag. EBITDA margin contracted 220bps YoY to 10.8%, primarily due to start-up costs associated with the new greenfield facilities. Management indicated that manpower costs will increase gradually with the ramp up of these facilities. MSUMI is actively looking for localisation opportunities to support margins going ahead.
* Other highlights: 1) Capex guidance for FY26 stands at INR 2bn. 2) The management indicated that it is not currently facing any supply-side constraints. 3) ROCE for FY25 stood at 42% (above the target of 40%). We transfer coverage to Saksham Kaushal.
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SEBI Registration Number is INM000010361
