Motherson Sumi Systems Companyname

RESULT UPDATE

MOTHERSON SUMI SYSTE MS Strong quarter; looking beyond FY21

India Equity Research| Automobiles

COMPANYNAME Motherson Sumi’s (MSS) Q4FY20 EBITDA at INR13.9bn surpassed our and EDELWEISS 4D RATINGS consensus estimates ~40% driven by sharp gross margin improvement Absolute Rating BUY and overall sharpened cost focus. While near-term outlook remains hazy, Rating Relative to Sector Outperform the COMPANYNAME company is well placed to benefit from: 1) Faster-than-expected Risk Rating Relative to Sector High recovery in developed markets. 2) Cost reduction initiatives as volumes Sector Relative to Market Overweight recovers. 3) Strong FCF generation as the peak capex cycle is behind. Management is targeting USD33-35bn revenue over the next five years, which includes ~25% contribution from non-automobile segments MARKET DATA (R: MOSS.BO, B: MSS IN) (aerospace, defence, healthcare, logistics, etc). However, given the near- CMP : INR 102 Target Price : INR 117 term uncertainties, we are adjusting our FY21/22E EPS -40%/+3%. 52-week range (INR) : 151 / 49 Maintain ‘BUY’ with revised TP of INR117 (INR96 earlier) as we roll over Share in issue (mn) : 3,157.7 valuations to FY22E. M cap (INR bn/USD mn) : 322 / 8,113

Avg. Daily Vol.BSE/NSE(‘000) : 11,087.5 Q4FY20: Strong operating performance after long

Consolidated revenue of INR151bn (down 12.0% YoY) was ~5% below our estimate. SHARE HOLDING PATTERN (%)

However, strong improvement in gross margin (up 240bps YoY) due to product mix and Current Q3FY20 Q2FY20 cost control efforts translated into EBITDA margin of 9.2% (up ~200bps YoY), ahead of Promoters * 61.7 61.7 61.7 our 6.0% estimate. SMR posted an all-time high EBITDA margin of 14%. However, MF's, FI's & BK’s 13.6 12.6 13.5 margins at SMP and PKC declined 255bps and 50bps YoY to 4.2% and 8.1%, FII's 15.5 16.4 14.9 respectively. Over the near term, we expect margin benefits due to mix improvement Others 9.2 9.3 9.8 and cost reduction efforts to sustain, offset by negative operating leverage. * Promoters pledged shares : NIL (% of share in issue)

Looking beyond FY21 PRICE PERFORMANCE (%)

Near-term outlook remains weak across MSS’s business lines. Management expects all its Stock Nifty EW Auto Index plants to operate at ~75% utilisation level by June 2021-end (except India). It anticipates 1 month 9.3 (1.5) 7.6 a strong bounce back in demand to pre-COVID-19 level given the robust direct and 3 months (23.1) (21.4) (17.9) indirect support by governments across regions. Highlights of the company’s next five 12 months (27.7) (23.3) (30.4) years’ plan also indicates that management’s penchant for M&A is unlikely to wane.

Outlook and valuation: Strong franchise; maintain ‘BUY’ We like MSS’s strong India franchise and the steady improvement in its SMR/ SMP businesses. We maintain ‘BUY/SO’ with TP of INR117 (valuing India business at 25x, SMR/SMP/PKC at 14x March 2022E PE). The stock is trading at 33.7/15.0x FY20/21E PE.

Financials (INR mn) Year to March Q4FY20 Q4FY19 % Chg Q3FY20 % Chg FY20 FY21E FY22E Chirag Shah Net revenues 151,591 171,695 (11.7) 156,611 (3.2) 635,369 550,045 639,561 +91 22 6623 3367 [email protected] EBITDA 13,916 12,428 12.0 12,358 12.6 52,014 36,228 57,045 Adjusted Profit 2,824 4,100 (31.1) 3,586 (21.2) 11,700 9,512 21,328 Jay Mehta +91 22 4088 6072 Adjusted Diluted EPS 1.3 1.3 3.3 1.7 (21.2) 3.7 3.0 6.8 [email protected] Diluted P/E (x) 27.4 33.7 15.0

EV/EBITDA (x) 14.5 20.2 14.1 ROAE (%) 8.8 7.7 15.4 June 2, 2020

Edelweiss Research is also available on www.edelresearch.com, Edelweiss Securities Limited Bloomberg EDEL , Thomson First Call, Reuters and Factset.

Automobiles

Q4FY20 conference call: Key highlights Highlights  Next five years’ plan (up to 2025) 1. Targeting top line of USD33-35bn. 2. Will look to further diversify the group over the next five years, leveraging technologies that have been built and developed over the years. 3. Aerospace, defence, logistics and healthcare are some of the areas being evaluated. Scaling up the IT business as well. 4. Expects 75% revenue to still be based in auto. 5. Will give a more detailed outline in by August-September.  ROCE update 1. At group level is 10% (including greenfield and acquisition that have not been a part for five years). 2. Excluding greenfield and acquisitions, at group level is closer to 25%. 3. Standalone ROCE is 31%.  COVID-19 update 1. In Jan-Feb, outlook was positive and the situation in plants was improving. However, COVID-19 broke out in China during and so MSS’s Chinese plants went into lockdown. 2. By Feb-March realised that even US plants would go into lockdown. So started preparing for the same. Most of its US plants, barring those making ambulances, were shut down. 3. By May end, most of the plants have restarted. 4. Project Victory (which was already in place) helped cut costs. Overarching theme of the project is to boost ROCE. The company worked to identify costs (fixed costs, capex) at unit level and set a target to lower spends and increase automation to improve efficiency. 5. As soon as lockdown was in force, got a lot of support from the government in the form of loans to make payments (in US it got the payment within a week of the lockdown. In Germany, it was within three days). Most of the aid received (almost 95%) is in the form on loans (one-three years) and not grants. 6. Most of the government support will accrue from Q1FY21. Till March, only Chinese plants were in a shutdown. 7. Teams across plants focussed on preserving cash and improving working capital.  India update 1. All plants are now open and seeing some early spike in demand. 2. Nearly 15% of standalone business is exported. Seeing strong traction here, especially in Japan. Followed by that, farm equipment, 2Ws, PVs and then CV segment seeing pick up as well. 3. With confusion around BS VI now subsiding and a move to private mobility, expects a sharp pick up in vehicle demand (will be seen in Q3 & Q4FY21).

2 Edelweiss Securities Limited Motherson Sumi Systems

4. Performance improvement can be attributed to increased content due to BS VI. 5. As smaller suppliers are forced to wind down, MSS could potentially benefit due to increased business. 6. MWSI: Farm equipment sector in the US (like India) is also seeing robust traction, which has helped business.  Across geographies, OEMs have indicated that once the lockdown is over, they will ramp up quickly to recoup lost business.  MSS does not expect any delay in payments from customers nor is it delaying payments to suppliers.  Improvement in cash position: Due to overall focus on cash, results from Project Victory and lower capex intensity (lowest in past four years). Besides that, boosted cash position by tapping more liquidity lines and even raised INR10bn in the form on NCDs.  Post lockdown: There is enough cash fungiblity to ensure that it can be deployed towards companies/regions where it will be needed.  M&A update: While there were a lot of opportunities in Feb-March, government aid has given a new lease of life to most companies. As such, management believes opportunities in the near term (3-6 months) have dwindled.  Demerger (wiring harness) update: Restructuring is broadly on track. Expects a detailed plan over the next 1-3 months (once the global demand situation stabilises).  Order book: Typically 65-70% of the book are fresh orders (rest is replacement).  Utilisation levels: 1. 39% of its plants are at higher that 75% levels. 2. 22% plants are at 50-75% level. 3. 7% plants are at 25-50% level. 4. <25% plants are at 10% level. 5. By end of June expects utilisation at most of its global plants to be higher than 75%. India could be lower, as number of COVID-19 cases continues to spike. Gross margin improvement  Due to mix, cost reduction effort. Not due to any pricing benefits from OEM.  For SMRPBV, commodity contracts are generally for the life time of the project. In case of any movement beyond a band, there is discussion with the OEM and pass through happens with a lag of even 6 months. SMR margin improvement  Q4 is typically the strongest quarter (for all its businesses).  Margin in the current quarter does not have any one off, but a result of improved mix, seasonality and lower costs. Not taken any price increase in the quarter.  Winning orders which it had lost 5-7 years ago as well.  Camera business is yet to see any major uptick. SMP  Kecskemét was at EBITDA break-even level before COVID-19.

3 Edelweiss Securities Limited Automobiles

 With the help of its customers at Tuscaloosa: 1. Cut the number of employees from 2,400 to 1,800-1,900. 2. Updated some of its feeding lines, which has also helped lower costs (due to help from Daimler). 3. Expects Tuscaloosa to be fully operational (pre COVID-19 level) in Q2FY21.  With the help of customers, making best case efforts to turn Tuscaloosa profitable by FY21. Capex  Difficult to quantify FY21 capex as of now, but should be lower than INR20bn.  Spends will depend on how customer demand pans out.  In FY20 capex was ~ INR22bn, including a land purchase. Order book  By definition existing order book will be NIL in 2 years as the order book reflects the business that will flow over next 2 years. One the projects starts, entire revenue is removed from the order book.  There is no major delay in launches, but for COVID-19 situation. Cash and debt levels  Cash position of INR100bn includes committed as well as uncommiited lines. Large part of undrawn line is committed in nature.  Cash is largely fungible across businesses. Also most of the cash is at plant level.  Does not expect India business to breach debt covenant.  SMRPBV debt review in end June. Recovery in June is critical. The issue is not debt level, but dip in EBIDTA as plants were shut for 2 months. If required, parent will put in money or opt for covenant waiver. It depends on how June recovers. Bankers also understand the situation as there were plant shutdowns. Others  Spike in other income due to higher dividend of ~INR3bn versus only ~INR1bn last year.  Deprecation: Write-off of INR300mn is due to some fair valuation in land and building.

Table 1: SOTP valuation Particular March2022e EPS Target Multiple (PE) Value per share India 2.2 25.0 56 SMR 0.8 10.0 8 SMP 0.5 10.0 5 PKC 1.7 10.0 17 Others 1.6 20.0 32 Total 6.8 17.3 117 Source: Edelweiss research

4 Edelweiss Securities Limited Motherson Sumi Systems

Table 2: Key assumptions (INR mn) FY19 % YoY FY20 % YoY FY21E % YoY FY22E % YoY Net Sales 6,35,229 12.8 6,35,369 0.0 5,50,045 (13.4) 6,39,561 16.3 MSS 75,813 1.7 68,738 (9.3) 60,490 (12.0) 72,149 19.3 SMR 1,28,850 8.4 1,23,967 (3.8) 1,05,767 (14.7) 1,14,228 8.0 SMP 2,84,995 9.4 3,24,435 13.8 2,83,216 (12.7) 3,11,537 10.0 PKC 94,520 19.9 94,724 0.2 79,644 (15.9) 1,07,732 35.3 Others 51,052 69.8 23,505 (54.0) 20,929 (11.0) 33,915 62.0

EBITDA 53,484 25.4 52,014 (2.7) 36,228 (30.3) 57,045 57.5 MSS 12,728 (8.0) 11,020 (13.4) 8,987 (18.4) 12,071 34.3 SMR 14,628 6.3 14,400 (1.6) 10,128 (29.7) 12,090 19.4 SMP 12,696 (18.2) 11,886 (6.4) 9,135 (23.1) 14,131 54.7 PKC 8,359 52.2 9,422 12.7 5,039 (46.5) 14,005 177.9 Others 5,074 (185.4) 5,286 4.2 2,939 (44.4) 4,748 61.5

Margin (%) 8.4 8.2 6.6 8.9 MSS 16.8 16.0 14.9 16.7 SMR 11.4 11.6 9.6 10.6 SMP 4.5 3.7 3.2 4.5 PKC 8.8 9.9 6.3 13.0 Others 9.9 22.5 14.0 14.0

APAT 16,132 (6.1) 11,700 (27.5) 9,512 (18.7) 21,328 124.2 MSS 7,593 (13.6) 7,132 (6.1) 4,959 (30.5) 7,029 41.7 SMR 3,607 5.1 3,304 (8.4) 1,860 (43.7) 2,379 27.9 SMP 1,377 (50.8) 1,055 (23.4) 364 (65.5) 1,714 370.9 PKC 4,159 54.7 4,404 5.9 2,990 (32.1) 5,229 74.9 Others -605 12.9 -4,193 593.4 -661 (84.2) 4,977 (852.4)

EPS 5.1 (6.1) 3.7 (27.5) 3.0 (18.7) 6.8 124.2 MSS 2.4 (13.6) 2.3 (6.1) 1.6 (30.5) 2.2 41.7 SMR 1.1 5.1 1.0 (8.4) 0.6 (43.7) 0.8 27.9 SMP 0.4 (50.8) 0.3 (23.4) 0.1 (65.5) 0.5 370.9 PKC 1.3 54.7 1.4 5.9 0.9 (32.1) 1.7 74.9 Others (0.2) 12.9 (1.3) NM (0.2) NM 1.6 NM Source: Company, Edelweiss research

5 Edelweiss Securities Limited Automobiles

Chart 1: SMR revenue growth trend Chart 2: SMP revenue growth trend 450 20.0 1,000 45.0 410 12.0 800 33.0 600

370 4.0 21.0 (% YoY) (%

(% YoY) (% 400

330 (4.0) Mn) (Euro 9.0 (Euro Mn) (Euro

200 290 (12.0) (3.0)

0 (15.0)

250 (20.0)

Q4FY18 Q1FY20 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q2FY20 Q3FY20 Q4FY20

Q1FY18 Q2FY19 Q3FY17 Q4FY17 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 SMP revenues YoY change (RHS) SMR revenues YoY change (RHS)

Chart 3: PKC revenue and margins trend Chart 4: Domestic revenue growth trend 350 12.0 25,000 100.0

280 10.8 20,000 75.0

210 9.6 15,000 50.0 (%)

140 8.4 YoY) (%

(Euro Mn) (Euro 10,000 25.0 (INR mn) (INR

70 7.2 5,000 0.0

0 6.0

0 (25.0)

Q1FY20 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q2FY20 Q3FY20 Q4FY20

Q2FY18 Q2FY17 Q4FY17 Q4FY18 Q2FY19 Q4FY19 Q2FY20 Q4FY20 PKC revenues EBITDA margin India YoY

Chart 5: SMR/SMP margin trend 15.0

12.0

9.0

6.0

EBITDA Margin (%) Margin EBITDA 3.0

0.0

Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q3FY20 Q4FY20 Q1FY18 Q2FY20 SMP SMR Source: Company reports, Edelweiss research

6 Edelweiss Securities Limited Motherson Sumi Systems

Financial snapshot (INR mn) Year to March Q4FY20 Q4FY19 % change Q3FY20 % change FY20 FY21E FY22E Net revenues 151,591 171,695 (11.7) 156,611 (3.2) 635,369 550,045 639,561 Raw material costs 84,411 99,740 (15.4) 90,417 (6.6) 362,715 290,041 315,390 Staff costs 38,028 39,552 (3.9) 37,259 2.1 150,769 121,010 143,901 Other expenses 15,235 19,975 (23.7) 16,577 (8.1) 69,872 102,766 123,224 EBITDA 13,916 12,428 12.0 12,358 12.6 52,014 36,228 57,045 Depreciation 6,937 4,780 45.1 6,057 14.5 27,780 18,971 21,069 EBIT 6,979 7,648 (8.7) 6,301 10.8 24,234 17,258 35,976 Interest 1,382 1,030 34.2 1,791 (22.9) 5,986 5,986 5,986 Other income 151 682 (77.8) 783 (80.7) 2,307 2,668 3,230 Add: Exceptional items Profit before tax 5,749 6,562 (12.4) 5,292 8.6 20,554 13,940 33,220 Provision for taxes 3,315 2,479 33.7 1,227 170.2 8,184 4,182 9,833 Minority interest (477) 194 NA 698 NA 1,244 2,196 4,009 Associate profit share (87) 211 NA 218 NA 575 1,950 1,950 Reported net profit 1,834 4,100 (55.3) 2,705 (32.2) 11,700 9,512 21,328 Adjusted Profit 2,824 4,100 (31.1) 3,586 (21.2) 11,700 9,512 21,328 Diluted shares (mn) 2,105 3,158 2,105 3,158 3,158 3,158 Adjusted Diluted EPS 1.3 1.3 3.3 1.7 (21.2) 3.7 3.0 6.8 Diluted P/E (x) - - - 27.4 33.7 15.0 EV/EBITDA (x) - - - 14.5 20.2 14.1 ROAE (%) - - - 8.8 7.7 15.4

As % of net revenues Raw material 55.7 58.1 57.7 57.1 52.7 49.3 Employee cost 25.1 23.0 23.8 23.7 22.0 22.5 Other expenses 10.1 11.6 10.6 11.0 18.7 19.3 EBITDA 9.2 7.2 7.9 8.2 6.6 8.9 Adjusted net profit 1.9 2.4 2.3 1.8 1.7 3.3 Reported net profit 1.2 2.4 1.7 1.8 1.7 3.3 Tax rate 57.7 34.0 23.2 39.8 30.0 29.6

Change in Estimates FY21E FY22E New Old % change New Old % change Comments Net Revenue 550,045 595,464 (7.6) 639,561 646,409 (1.1) EBITDA 36,228 44,645 (18.9) 57,045 55,082 3.6 EBITDA Margin 6.6 7.5 8.9 8.5 Adjusted Profit 9,512 15,736 (39.6) 21,328 20,849 2.3 After Tax Net Profit Margin 2.1 3.0 4.0 3.9 Capex 10,050 10,820 (7.1) 14,477 10,820 33.8

7 Edelweiss Securities Limited Automobiles

Company Description Motherson Sumi Systems (MSS), is a JV between Samvardhana Motherson International (SMIL) and Sumitomo Wiring Systems, Japan (SWS). It is the flagship company of Samvardhana Motherson Group (SMG). With presence in 25 countries and turnover of ~USD6.5 bn as of FY17, the group supplies to all major automobile manufacturers across the world.

MSS can be regarded as inorganic growth specialist. Pertinently, the company has successfully turned around its recent two key acquisitions, SMR and SMP. Its latest acquisition of PKC, a Finland based M&HCV wiring harness player remains well placed to capitalised on growth across US and Europe geographies

Investment Theme Historically, MSS’s revenue and profits have catapulted ~5x every 5 years driven by rising content per vehicle, diversified geography & clients and acquisitions. Our analysis of successful global leaders—Bosch, Johnson Control, Magna—indicates acquisitions have been integral to growth; MSS is treading the same path.

We believe the India business is well placed to benefit from rising content per vehicle with upcoming safety and BS-VI emission norms. Though revenue visibility for the SMR and SMP business is improving, the pace of ramp up at new plants remains key to margin improvement.

Key Risks Complex structure raises concerns MSS has too many subsidiaries/JVs, which complicates the ownership structures.

Weaker global demand The company’s key subsidiaries (SMR/SMP) are highly dependent on demand from the luxury car segment. Weakness in global premium car demand can impact order books of SMR/SMP. This in turn could delay expected turnaround in these subsidiaries.

Execution risks Delays in turnaround of subsidiaries and/or lower-than-anticipated group synergies remain a concern for SMR/SMP.

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Financial Statements Key Assumptions Income statement (INR mn) Year to March FY19 FY20 FY21E FY22E Year to March FY19 FY20 FY21E FY22E Macro Income from operations 635,229 635,369 550,045 639,561 GDP(Y-o-Y %) 6.1 4.8 (4.0) 7.0 Materials costs 367,383 362,715 290,041 315,390 Inflation (Avg) 3.4 4.3 3.5 4.0 Employee costs 141,694 150,769 121,010 143,901 Repo rate (exit rate) 6.3 4.4 3.0 4.0 Total SG&A expenses 72,668 69,872 102,766 123,224 USD/INR (Avg) 70.0 70.7 75.0 73.0 Total operating expenses 581,745 583,355 513,817 582,516 Sector EBITDA 53,484 52,014 36,228 57,045 4W - domestic vol (% YoY) 10.0 (18.0) (16.0) 15.0 Depreciation 20,582 27,780 18,971 21,069 2W - domestic vol (% YoY) 12.0 (18.0) (14.0) 16.0 EBIT 32,902 24,234 17,258 35,976 Company Less: Interest Expense 4,232 5,986 5,986 5,986 Cost assumptions Add: Other income 2,201.8 2,306.69 2,668.33 3,229.86 Financial assumptions Profit Before Tax 30,872 20,554 13,940 33,220 Variable expenses (% sales) 3.3 3.2 3.0 4.0 Less: Provision for Tax 11,022 8,184 4,182 9,833 Fixed expenses (% sales) 4.6 4.8 5.7 5.4 Less: Minority Interest 4,850 1,244 2,196 4,009 Avg. Interest rate (%) 3.9 4.6 4.6 4.6 Associate profit share 1,131 575 1,950 1,950 Depreciation rate (%) 10.0 10.9 6.1 6.6 Reported Profit 16,132 11,700 9,512 21,328 B/S assumptions Adjusted Profit 16,132 11,700 9,512 21,328 Tax rate (%) 35.7 39.8 30.0 29.6 Shares o /s (mn) 3,158 3,158 3,158 3,158 Dividend payout (%) 35.4 47.2 40.8 29.1 Adjusted Basic EPS 5.1 3.7 3.0 6.8 Capex (INR mn) (27,627) (46,396) (10,050) (14,477) Diluted shares o/s (mn) 3,158 3,158 3,158 3,158 Net borrowings (INR mn) 63,492 71,279 80,189 61,141 Adjusted Diluted EPS 5.1 3.7 3.0 6.8 Debtor days 40 40 43 39 Adjusted Cash EPS 11.6 12.5 9.0 13.4 Inventory days 43 49 58 51 Dividend per share (DPS) 1.5 1.5 1.1 1.7 Payable days 163 176 205 190 Dividend Payout Ratio(%) 35.4 47.2 40.8 29.1 Cash conversion cycle (79) (87) (104) (100)

Common size metrics Year to March FY19 FY20 FY21E FY22E Materials costs 57.8 57.1 52.7 49.3 Staff costs 22.3 23.7 22.0 22.5 S G & A expenses 11.4 11.0 18.7 19.3 Operating expenses 91.6 91.8 93.4 91.1 Depreciation 3.2 4.4 3.4 3.3 Interest Expense 0.7 0.9 1.1 0.9 EBITDA margins 8.4 8.2 6.6 8.9 Net Profit margins 3.3 2.0 2.1 4.0

Growth ratios (%) Year to March FY19 FY20 FY21E FY22E Revenues 12.8 - (13.4) 16.3 EBITDA 4.4 (2.7) (30.3) 57.5 PBT (1.3) (33.4) (32.2) 138.3 Adjusted Profit (6.1) (27.5) (18.7) 124.2 EPS (6.1) (27.5) (18.7) 124.2

9 Edelweiss Securities Limited Automobiles

Free cash flow (INR mn) Profitability and efficiency ratios Year to March FY19 FY20 FY21E FY22E Year to March FY19 FY20 FY21E FY22E Reported Profit 16,132 11,700 9,512 21,328 ROAE (%) 15.4 8.8 7.7 15.4 Add: Depreciation 20,582 27,780 18,971 21,069 ROACE (%) 14.7 10.0 7.1 13.3 Interest (Net of Tax) 2,721 3,603 4,190 4,214 Inventory Days 43 49 58 51 Others 4,648 11,922 1,324 2,551 Debtors Days 40 40 43 39 Less: Changes in WC 958 (8,515) 21,445 3,439 Payable Days 163 176 205 190 Operating cash flow 43,124 63,521 12,551 45,723 Cash Conversion Cycle (79) (87) (104) (100) Less: Capex 27,627 46,396 10,050 14,477 Current Ratio 1.3 1.3 1.5 1.5 Free Cash Flow 15,497 17,124 2,502 31,246 Gross Debt/EBITDA 2.0 2.5 3.6 2.3 Gross Debt/Equity 0.8 0.9 0.8 0.8

Cash flow metrics Adjusted Debt/Equity 0.8 0.9 0.8 0.8 Year to March FY19 FY20 FY21E FY22E Net Debt/Equity 0.4 0.5 0.5 0.4 Operating cash flow 43,124 63,521 12,551 45,723 Interest Coverage Ratio 7.8 4.0 2.9 6.0 Financing cash flow (2,246) (29,458) (9,865) (12,198)

Investing cash flow (33,105) (22,399) (10,050) (14,477) Operating ratios Net cash Flow 7,773 11,663 (7,363) 19,048 Year to March FY19 FY20 FY21E FY22E Capex (27,627) (46,396) (10,050) (14,477) Total Asset Turnover 2.7 2.4 2.0 2.2 Dividend paid (6,395) (5,519) (3,878) (6,212) Fixed Asset Turnover 3.9 3.3 2.7 3.2 Equity Turnover 4.7 4.3 3.6 3.9

Valuation parameters Year to March FY19 FY20 FY21E FY22E Adj. Diluted EPS (INR) 5.1 3.7 3.0 6.8 Y-o-Y growth (%) (6.1) (27.5) (18.7) 124.2 Adjusted Cash EPS (INR) 11.6 12.5 9.0 13.4 Diluted P/E (x) 20.0 27.5 33.8 15.1 EV / Sales (x) 1.3 1.3 1.6 1.3 EV / EBITDA (x) 6.0 6.2 8.9 5.6 Dividend Yield (%) 1.5 1.5 1.0 1.7

Peer comparison valuation Market cap Diluted P/E (X) EV / EBITDA (X) ROAE (%) Name (USD mn) FY21E FY22E FY21E FY22E FY21E FY22E Motherson Sumi Systems 4,295 33.8 15.1 8.9 5.6 7.7 15.4 Amara Raja Batteries 1,400 21.1 17.4 10.6 9.2 13.5 14.3 Exide Industries 1,850 15.2 13.7 8.7 7.8 13.8 14.1 Suprajit Engineering 200 13.3 10.8 7.9 6.3 13.9 15.3 Median 1,626 18.2 14.4 8.8 7.1 13.7 14.8 AVERAGE 1,937 20.9 14.2 9.0 7.2 12.2 14.8 Source: Edelweiss research

10 Edelweiss Securities Limited Motherson Sumi Systems

Additional Data Directors Data Vivek Chaand Sehgal, Chairman Non-Executive Director Laksh Vaaman Sehgal Non-Executive Director Toshimi Shirakawa Non-Executive Director Pankaj Mittal Executive Director S.C. Tripathi, IAS (retd.) Non-Executive Independent Director Arjun Puri Non-Executive Independent Director Gautam Mukherjee Non-Executive Independent Director Naveen Ganzu Non-Executive Independent Director Geeta Mathur Non-Executive Independent Director Noriyo Nakamura Non-Executive Director

Auditors - Price Waterhouse *as per last annual report

Holding – Top10 Perc. Holding Perc. Holding Samvardhana motherso 33.43 Sumitomo wiring syst 25.1 Icici prudential ass 5.46 Sehgal vivek chaand 2.32 Sbi funds management 1.6 Federated investors 1.14 Vanguard group 1.12 Reliance capital tru 1.05 Blackrock 0.85 Uti asset management 0.84

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

No Data Available

*in last one year

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

No Data Available

*in last one year

11 Edelweiss Securities Limited RATING & INTERPRETATION

Company Absolute Relative Relative Company Absolute Relative Relative reco reco risk reco reco Risk Amara Raja Batteries HOLD None None Ashok Leyland BUY SO H Bajaj Auto BUY SO L Ceat Ltd BUY SP None Eicher Motors BUY SO M Exide Industries BUY None None Hero MotoCorp BUY SU H Mahindra & Mahindra Ltd BUY SO M Maruti Suzuki India Ltd HOLD SU H Minda Corporation BUY SO M Motherson Sumi Systems BUY SO H Suprajit Engineering BUY None H Tata Motors Ltd BUY SO H

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return

12 Edelweiss Securities Limited Motherson Sumi Systems

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098. Board: (91-22) 4009 4400, Email: [email protected]

Aditya Narain

Head of Research [email protected]

Coverage group(s) of stocks by primary analyst(s): Automobiles Ashok Leyland, Amara Raja Batteries, Bajaj Auto, Ceat Ltd, Eicher Motors, Exide Industries, Hero MotoCorp, Minda Corporation, Mahindra & Mahindra Ltd, Maruti Suzuki India Ltd, Motherson Sumi Systems, Suprajit Engineering, Tata Motors Ltd

Recent Research

Date Company Title Price (INR) Recos

01 -Jun-20 Amara Raja Replacement holding up; 647 Hold Batteries Result Update 29-May-20 Ceat Robust show; well placed to 810 Buy capitalise on revival ; Result Update 21-May-20 Bajaj Auto Strong performance in a tough 2556 Buy quarter; Result Update

Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Rating Interpretation

Buy Hold Reduce Total Rating Expected to

Rating Distribution* 161 67 11 240 Buy appreciate more than 15% over a 12-month period * 1stocks under review Hold appreciate up to 15% over a 12-month period > 50bn Between 10bn and 50 bn < 10bn 743 Reduce depreciate more than 5% over a 12-month period Market Cap (INR) 156 62 11 594

One year price chart 446 165

(INR) 297 140

149 115

- (INR) 90

14 14

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19 20 20

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13 Edelweiss Securities Limited

Automobiles

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Motherson Sumi Systems

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15 Edelweiss Securities Limited

Automobiles

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