Motherson Sumi Systems

4QFY2009 Result Update

ACCUMULATE Performance Highlights

„ Consolidated Sales better on new acquisition: For 4QFY2009, Motherson
Price Rs75 Sumi Systems (MSSL) clocked 41.1% yoy growth in Net Sales to Rs843.3cr
(Rs597.7cr). The numbers for the quarter are not exactly comparable as it
Target Price Rs78 includes one month results of Samvardhana Motherson Visiocorp Solution
Investment Period 12 months
(SMVSL, acquired during the quarter). Sales growth came largely on the back
of this inorganic operation where MSSL’s Revenue Outside-India jumped
Stock Info significantly by 117.7% yoy to Rs454.4cr (Rs208.8cr). However, MSSL’s
Domestic Market Revenue declined marginally by 1.5% yoy to Rs372cr
Sector Auto Ancillary (Rs354cr). MSSL registered 46% yoy decline in Bottom-line (excluding
Exceptional Items) to Rs33.4cr (Rs61.8cr) for 4QFY2009, which was in line
Market Cap (Rs cr) 2,680 with our expectation. Reported Net Profit of Rs76.9cr includes Rs89.7cr
(Rs43.5cr adj. for Minority Interest) as one-time financial support agreed with
Beta 0.3
the business stakeholders of SMVSL.
52 WK High / Low 93/38 „ Subdued Margins on higher Raw Material and Employee costs: During
4QFY2009, MSSL registered a 770bp yoy decline in EBITDA Margins to
Avg Daily Volume 299392
10.7% (18.4%). Raw Material cost jumped by 925bp yoy to 63.4% (54.1%) in
Face Value (Rs) 1 4QFY2009 impacted partially by Rupee depreciation, which inflated the cost
of import contents. High cost of inventory also impacted Raw Material costs
BSE Sensex 14,495 during the quarter. However, the company managed to prune Other
Expenditure by 451bp yoy, restricting further OPM contraction. New
Nifty 4,291 acquisition added to the Staff costs, which increased by 324bp yoy. MSSL
reported 18.1% yoy decline in Operating Profits to Rs89.8cr (excluding net
BSE Code 517334
exchange difference on FCCBs and others).
NSE Code MOTHERSUMI „ Standalone Performance: During the quarter, the company reported 16.5%
yoy decline in Top-line to Rs324.8cr (Rs389.1cr) and 64.1% yoy dip in
Reuters Code MOSS.BO Bottom-line to Rs16.1cr (Rs44.7cr). Net Profit included one-time Exceptional
expenditure of Rs11cr. Thus, adjusted for Exceptional item, Net Profit
Bloomberg Code MSS@IN
declined 27.6% yoy to Rs36.7cr (Rs50.7cr). OPM declined to 17.9% (19.6%)
Shareholding Pattern (%) on higher Raw Material cost to Sales ratio and high Staff cost to Sales ratio.
„ Segment-wise roundup: The Auto Segment registered 22.9% yoy decline in
Promoters
71.0 Sales to Rs294.1cr (Rs381.6cr) while Non-Auto Sales fell 27.2% yoy to
MF/Banks/Indian FIs Rs26.8cr (Rs36.9cr) in 4QFY2009. Margins were under pressure due to high
13.2 Raw Material prices and adverse currency movement. The Auto Segment
FII/ NRIs/ OCBs EBIT yoy fell by a sharp 38.7% to Rs33.2cr (Rs54.2cr) while Non-Auto EBIT
6.6
was yoy down by 42.1% yoy to Rs3.5cr (Rs6.0cr) during the quarter.
Indian Public
9.2
Key Financials (Consolidated)
Y/E March (Rs cr) FY2008 FY2009 FY2010E FY2011E
Abs. 3m 1yr 3yr Net Sales 2,051.8 2,639.7 5,027.9 5,346.2
% chg 34.3 28.7 90.5 6.3
Sensex (%) 51.5 7.7 36.6
Adj. Net Profit 177.9 176.3 190.0 253.6
MSSL (%) 16.1 (3.8) 28.6 % chg 37.7 (0.9) 7.8 33.4
Note: Bonus Issue in FY2008 at 2:1 OPM (%) 15.8 12.4 8.9 9.8
Adj. EPS (Rs) 5.0 5.0 4.9 6.5
Vaishali Jajoo P/E (x) 15.0 15.1 15.3 11.6
P/BV (x) 5.0 3.4 2.5 2.2
Tel: 022 – 4040 3800 Ext: 344
RoE (%) 32.7 16.9 16.6 19.4
e-mail: vaishali.jajoo@angeltrade.com
RoCE (%) 21.3 10.1 11.7 14.1
EV/Sales (x) 1.3 1.0 0.5 0.5
EV/EBITDA (x) 9.4 9.3 6.9 5.8
Source: Company, Angel Research; FY2010E and FY2011E Earnings are on fully diluted equity

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 Motherson Sumi Systems
Auto Ancillary

Exhibit 1: 4QFY2009 Segment-wise Performance

Y/E Mar (Rs cr) 4QFY2009 4QFY2008 % chg FY2009 FY2008 % chg
Total Net Sales 327.9 417.3 (21.4) 1,343.6 1,362.5 (1.4)
Auto Segment 294.1 381.6 (22.9) 1,168.5 1,211.8 (3.6)
Non Auto Segment 26.8 36.9 (27.2) 147.0 149.4 (1.6)
Other Segments 6.9 (1.2) 28.0 1.3
Total EBIT 36.7 60.2 (39.0) 120.4 184.8 (34.8)
Auto Segment 33.2 54.2 (38.7) 108.0 168.8 (36.0)
Non Auto Segment 3.5 6.0 (42.1) 12.4 16.0 (22.3)
EBIT Margin (%) 11.2 14.4 9.0 13.6
Auto Segment 11.3 14.2 9.2 13.9
Non Auto Segment 12.9 16.3 8.5 10.7
Source: Company, Angel Research

New acquisition: During 4QFY2009, MSSL acquired a global company in the business
of rear view mirrors from Visiocorp plc, with Revenues in excess of Euro 660mn and
normalised EBITDA of Euro 48mn (approx.) during 2007. The acquisition was made
through a step down SPV to be set up between MSSL and SMFL in the ratio of 51:49 (%)
and the said SPV would (directly or indirectly) acquire various operating companies
engaged in the design, manufacture, assembly of rear view mirrors, operating in Europe,
America, Australia and Asia including India where MSSL has a successful JV in which it
holds 49% stake. Visiocorp is one of the largest players in the rear view mirror business
and its customers include, General Motors, Ford, Hyundai, Volkswagen, Renault/Nissan,
Mercedes Benz, BMW, Audi, Tata JLR, Maruti Suzuki, etc.

On March 6, 2009, SMVSL, incorporated in Jersey 95% owned by Samvardhana

Motherson Global Holdings (SMGHL), together with its subsidiaries acquired all the
subsidiaries of Visiocorp Ptc. (in administration) for a cash consideration of Euro 24.8mn
and issue of consideration shares amounting to Euro 1.5mn to the lenders of the erstwhile
Visiocorp Group. SMGHL is JV between the company and Samvardhana Motherson
Finance through their overseas 100% Subsidiaries incorporated in Mauritius. In
connection with the acquisition, one-time financial support agreed with the business
stakeholders, has been accounted as Exceptional Income in the consolidated results for
the quarter and year ended March 31, 2009.

Outlook and Valuation

MSSL is a leader in Wire Harnessing controlling over 65% of the domestic passenger
vehicle (PV) market. The company is now focusing on the supply of higher level
assemblies and modules where the margins are comparatively higher. The company is
also increasing content per car in its bid to diversify its product portfolio. MSSL is laying
emphasis on its global product plan (GPP) wherein it is looking at setting up JVs with
leading Tier-I suppliers to upgrade its technology base and bolster its clientele.
We estimate MSSL’s consolidated Net Sales to register substantial growth in FY2010
aided by its recent acquisition. However, on the Margin front, we estimate the company to
register contraction owing to increasing contribution of Sales from Outside India. We
estimate the company to clock EPS of Rs4.9 in FY2010E and Rs6.5 in FY2011E on a
consolidated basis. However, we would revisit our numbers as and when the company
provides more financial details of SMVSL. At the CMP, the stock is trading at 15.3x
FY2010E and 11.6x FY2010E consolidated Earnings (fully diluted). We recommend
Accumulate the stock at lower levels, with a Target Price of Rs78.

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 Motherson Sumi Systems
Auto Ancillary

Exhibit 2: 4QFY2009 Performance (Consolidated)

Y/E Mar (Rs cr) 4QFY2009 4QFY2008 % chg FY2009 FY2008 %chg
Net Sales 843.3 597.7 41.1 2,639.7 2,051.8 28.7
Other Income 2.4 25.0 (90.4) 5.0 27.4 (81.9)
Total Income 845.7 622.6 35.8 2,644.7 2,079.2 27.2
EBITDA 89.8 109.7 (18.1) 327.8 300.4 9.1
OPM (%) 10.7 18.4 (770.1) 12.4 14.6
Interest 11.2 3.3 35.4 24.4
Depreciation 35.4 28.6 23.7 97.9 84.7 15.6
Forex Gain/(Loss) 4.9 (29.5) (33.1) (16.2)
PBT 50.6 73.3 (31.0) 166.3 226.2 (26.5)
Tax 17.2 11.5 34.9 51.4
PAT 33.4 61.8 (46.0) 131.5 174.8 (24.8)
EOI 43.5 2.6 44.8 3.0
PAT incl EOI 76.9 64.4 19.5 176.3 177.9 (0.9)
EPS (Rs) 2.2 0.9 5.0 5.0
Source: Company, Angel Research

Exhibit 3: 4QFY2009 Performance (Standalone)

Y/E Mar (Rs cr) 4QFY2009 4QFY2008 % chg FY2009 FY2008 % chg
Net Sales 324.8 389.1 (16.5) 1322.9 1320.3 0.2
Other Income 2.0 25.0 (92.1) 9.3 27.5 (66.1)
Total Income 326.8 414.1 (21.1) 1332.2 1347.8 (1.2)
EBITDA 58.1 76.2 (23.8) 174.4 209.8 (16.9)
OPM (%) 17.9 19.6 13.2 15.9
Interest 7.2 7.3 29.1 21.9
Depreciation 14.9 14.7 1.0 54.5 50.1 8.9
EOI (11.0) 0.0 (11.0) 0.0
Profit Before Tax 36.7 50.7 (27.6) 96.2 164.2 (41.4)
Tax 9.6 6.0 15.7 36.0
PAT including EOI 16.1 44.7 (64.1) 69.5 128.2 (45.8)
EPS (Rs) 0.5 1.3 2.0 3.6
Source: Company, Angel Research

June 30, 2009 3

 Motherson Sumi Systems
Auto Ancillary

Research Team Tel: 4040 3800 E-mail: research@angeltrade.com TM

Website: www.angeltrade.com

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