Motherson in top gear on strong operating performance

Motherson Sumi

Employees of Motherson Sumi Systems Ltd, work on a car wiring assembly line inside a factory in Noida on the outskirts of New Delhi (Photo: Reuters)



Auto components maker Motherson Sumi reported an in-line performance in the December quarter (Q3). Consolidated revenue at Rs 10,514 crore was its highest ever for a quarter, versus expectations of Rs 10,700 crore. This was 13 per cent higher over the year ago quarter both on better performance of its overseas subsidiaries (SMR and SMP) as well as its Indian operations. The two subsidiaries, which account for 86 per cent of consolidated revenues, grew 12 per cent to Rs 9,061 crore over the year ago quarter. Revenues from India were strong growing at 24 per cent year-on-year.

The management indicated that higher content per car and launch of new models have helped achieve some of the India related gains. Indian operations are expected to benefit given that newer models and higher content per car could improve realisations.

Operating profit at Rs 1,109 crore was better than estimates of Rs 1,021 crore, and represents a year-on-year increase of 23 per cent. Tight control on costs, especially other expenses, helped in improving operating profits and margins which came in at 10.54 per cent or about 80 basis points more than the year ago quarter. Raw material costs, largely copper, rose 21 per cent over this period. But, since commodity costs are normally a pass through, it did not impact margins.

Margins at the two subsidiaries came in at 7.8 per cent, 40 per cent higher than the December 2015 quarter. While SMR margins improved by 100 basis points to 11.7 while SMP margin gains were marginal at 10 basis points, largely helped by increased capacity utilisation.

Going ahead, the company is banking on new programmes and orders on a leaner cost structure to improve margins. Further, a ramp up in capacity utilisation should boost profitability of the two subsidiaries.

Good operating performance coupled with higher other income (Rs 43 crore vs Rs 3 crore in the year ago quarter) helped Motherson post a net profit of Rs 416 crore (up 34 per cent year-on-year). Analyst had pegged the same at about Rs 395 crore. The stock, which hit a 52-week high level of Rs 358.90 in trade on Monday, shed the gains closing a per cent lower to Rs 351, due to some profit-booking.

Going ahead, the Street will keep an eye on the closure of the deal to acquire Finnish wiring harness maker, PKC (for Rs 4,000 crore) as well as the progress on the nine upcoming plants across the globe. Of the nine, three each are coming up in India and Hungary.