Buy Motherson Sumi Wiring Ltd For Target Rs.44 by Choice Institutional Equities
Q2FY27 performance highlights:
MSUMI delivered a robust performance, with revenue increasing 47% YoY to INR 40,538 Mn, outperforming the PV industry's 25% growth. Growth was driven by volumes, premiumisation, content per vehicle, ICE and EV launches and greenfield contribution. EBITDA increased 34% YoY to INR 3,736 Mn, while PAT rose 35% to INR 2,234 Mn. EBITDA margin improved 164 bps QoQ to 9.2%, but remained 91 bps lower YoY due to copper inflation and cost pressures
Greenfield ramp-up & cost recovery:
All three greenfield facilities have reached optimal utilisation and are treated as regular plants, supporting operating leverage. Copper prices rose 54% YoY and 6% QoQ to INR 1,430/kg; passthrough typically takes three months, extending to six months for select customers. The management is negotiating recovery of copper and wage costs, targeting full wage-cost recovery and expects improvement by FY27E. Localisation and productivity initiatives are expected to provide support to margin.
EV momentum & higher content per vehicle:
EVs contributed 10% of Q2FY27 revenue and 9.3% in H1FY27. We believe premiumisation, electrification and rising content per vehicle will drive sustained growth, supported by MSUMI’s presence across ICE and EV platforms. FY27E capex is expected at INR 2,000 Mn
We estimate margin to improve gradually with better cost pass-through and greenfield productivity, while timely recovery of copper and wage cost remains a key monitorable.
Q2FY27: Result is better than our estimate on all fronts
* Revenue was at INR 40,538 Mn, up 46.8% YoY and 19.0% QoQ (vs CIE est. of INR 34,661 Mn)
* EBITDA was up 33.6% YoY and 44.7% QoQ to INR 3,736 Mn (vs CIE est. of INR 2,877 Mn). EBITDA margin was down 91 bps YoY and up 164 bps QoQ to 9.2% (vs CIE est. of 8.3%)
* PAT was up 35.1% YoY and 53.7% QoQ to INR 2,234 Mn (vs CIE est. of INR 1,660 Mn)
View and Valuation:
We increase our FY27/28E EPS estimate by 3.6%/2.6% respectively, factoring in strong Q2FY27 performance. We maintain our target price of INR 44 (based on 30x average FY28/29E EPS). We upgrade our rating from ‘ADD’ to ‘BUY’, considering the recent stock correction, improving margin outlook and expected benefits from cost pass-through and operating leverage
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