Buy Motherson Sumi Wiring Ltd For Target Rs. 44 by Choice Institutional Equities Ltd
Q1FY27 performance highlights:
MSUMI delivered a strong operational performance, with revenue increasing 37.0% YoY to INR 34.1 Bn, significantly outperforming the Indian passenger vehicle industry's 17% YoY growth. The strong growth was driven by a healthy volume expansion, increasing content per vehicle, successful ramp-up of greenfield facilities, new customer programme launches and copper price pass-through. However, profitability and margin remained under pressure, reflecting the impact of elevated copper prices and exceptional minimum wage revisions
Greenfield ramp-up & cost recovery:
Greenfield facilities achieved a stable quarterly run rate of around INR 4.5 Bn and continued to operate at break-even levels. The management expects these facilities to begin contributing meaningfully to profitability over the next 1–2 quarters through higher utilisation and productivity improvements. The company also continues constructive discussions with customers to recover higher copper and wage costs while working to reduce the existing copper pass-through lag.
EV momentum & higher content per vehicle:
EV contribution increased from 6.5% in FY26 to 8.5% of revenue in Q1FY27, supported by rising EV production and higher wiring harness content. The management reiterated that increasing vehicle electrification, feature loading and next-generation vehicle architectures will continue to drive content per vehicle, with MSUMI already partnering with global OEMs on future platform development. We believe EBITDA margin will remain under pressure due to commodity volatility. However, we expect the margin to improve gradually from H2FY27 and strengthen further in FY28E as cost is passed on, utilisation improves and operating leverage kicks in
View and Valuation: We revise our FY27/28E EPS estimate downwards by 6.3%/7.5%, factoring in persistent margin pressure. Accordingly, we derive a revised target price of INR 44 based on FY28E EPS. We downgrade the stock from 'BUY' to 'ADD' due to reduced earnings visibility.
Q1FY27: Revenue Beats Estimate; Margin Pressure Persists
* Revenue was at INR 34,073 Mn, up 36.6% YoY and up 2.2% QoQ (vs CIE est. of INR 32,138 Mn)
* EBITDA was up 5.7% YoY and down 5.8% QoQ to INR 2,583 Mn (vs CIE est. of INR 2,764 Mn). EBITDA margin was down 221 bps YoY and 64 bps QoQ to 7.6% (vs CIE est. of 8.6%)
* PAT was up 1.6% YoY and down 13.1% QoQ to INR 1,453 Mn (vs CIE est. of INR 1,626 Mn)
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