Motherson Sumi falls 12% in three days post December quarter results


Motherson Sumi: Good quarter, more to follow?

  Motherson Sumi Systems has fallen 6% to Rs 321 on BSE in intra-day trade, extending its past two days 6% decline after the auto ancillary company reported a weak operational performance in December 2017 (Q3FY18) quarter.

The company’s consolidated net profit grew 5% to Rs 4.37 billion due to higher depreciation and tax outgo. Total sales during the quarter rose 36% to Rs 143 billion over the previous year quarter. EBITDA (earnings before interest, tax, depreciation and amortization) margin contracted 120 bps to 9.7% from 10.9%.

“MSL’s operating performance was impacted largely across its business in Q3FY18. This is after standalone margins were impacted by higher input cost (that usually takes three to six months to pass on to the consumers) & employee cost; SMP’s margins were impacted due to start-up cost of €17 million; PKC’s margin were impacted by supplier’s material availability, which caused higher freight & labour expense,” analysts at ICICI Securities said in result update.

The brokerage firm believes that negative operating leverage & currency movement impacted SMR’s performance during the quarter.

According to the management, most above problems will be sorted out over the next six to 12 months, thereby resulting into margin expansion, going forward, added report with maintain ‘hold’ rating on the stock.

While SMR revenue growth in the quarter disappointed, we expect the same to pick-up going forward as two new plants become operational in Q3 and two in Q4FY18 (though some would be replacements of current plants); total of 9 new plants are at different stages of completion at SMRP BV, said analysts at Elara Capital in quarterly update.

At 11:05 AM; the stock was trading 5% lower at Rs 324 against unchanged in the S&P BSE Sensex at 34,298. A combined 5.83 million shares changed hands on the counter on BSE and NSE so far.