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MSWIL, in Q1FY25 delivered lower than expected performance on revenue and margin front. Revenue during the quarter increased by 16.7% YoY to Rs.21.85bn vs est of Rs.24.11bn. Margin for the quarter came at 10.9% (-14bps YoY/-212bps QoQ) impacted by higher other expenditure attributed to new plant setup. EBIDTA jumped by 15.3% YoY to Rs.2.4bn vs est of Rs.3.15bn and Net profit jumped by 21% YoY to Rs.1.48bn vs est of Rs.2.16bn.

Company is planning to increase capacity by 10-15% which is expected to operational in Q1FY25 in order to meet customer demand. Capex guidance for FY25 would be around Rs.200cr.

*  As PV segment is the largest revenue contributor for MSWIL, MSWIL are present in most of the top-selling models. Currently, PV demand is muted and inventory level is high with the dealers, going forward, start of festive season will help to increase the offtake from OEM. We expect PV industry in FY25 is expected to grow on low single digit pace. However, improving industry wise mix towards premiumization will increase the content value for the PV segment which will support MSWIL revenue to delivered better than industry growth in FY25. As the majority of MSWIL's revenue comes from the PV segment, we expect the company to experience steady growth in the PV segment over the next 2-3 years.

*  Automotive industry is increasing capacity and premiumisation: MSWIL is wellpositioned to take advantage of the rapidly changing trends in the automotive market. The growing desire for personalized vehicles results in an increased number of wiring harnesses per vehicle, leading to higher content per vehicle. The rising inclusion of connectivity features in cars, drives demand for premium SMART harness components. As the need for sustainable technologies and stricter safety and emission standards increases, the value per harness also rises, along with the company's offerings of advanced electronics and EV solutions. E4W content value is high around 1.7-2x and for E2W it would be around 4-5 times. Regarding EV and alternative powertrains, MSWIL is fully prepared to deliver high-voltage solutions, wiring harnesses, and components.

*  View and Valuation: We expect MSWIL to benefit from the increasing electrification of vehicles and the transition to EV and hybrid powertrains, leading to an increase in content value per vehicle. We are optimistic about MSWIL's growth story, supported by various other factors: 1) its product portfolio is immune to the transition to EVs; 2) it has a strong parentage background (SWS & MSS) providing access to technology; 3) MSWIL has ready solutions for Hybrid/EVs; 4) expanding capacity: 5) the company boasts a high RoCE profile. We value the company based on FY26E EPS (37x) to arrive at the TP of Rs.72. Recommend Reduce.

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