Motherson Sumi’s Net Profit Jumps 9x

Motherson Sumi Systems (MSSL) announced its Q1FY14 numbers on July 31. The company’s financials have been robust. Both its subsidiaries Samvardhana Motherson Reflectec (SMR) and Samvardhana Motherson Peguform (SMP) have shown a strong performance, which has boosted its overall performance. The fact that the company has performed well despite a slowdown in the global automobile industry is rather commendable.

On a consolidated basis, the revenues of MSSL touched Rs 7082.6 crore during the quarter, a growth of 10.87% as compared to that in Q1FY13. Its operating profit grew roughly three times to Rs 268.39 crore.

The company reported an exchange loss of Rs 167 crore on long-term foreign currency loans and other exchange losses of Rs 2.25 crore, making for a total of Rs 169.32 crore. In Q1FY13, the company had lost about Rs 200.90 crore in exchange differences. The reduced losses in foreign exchange lent the company’s operational profitability a major boost.

MSSL also reported a net profit of Rs 73.20 crore in Q1FY14, which is nine times higher than its Q1FY13 net profit of Rs 8.14 crore. During the quarter, SMR reported a net profit of Rs 37 crore as compared to a loss of Rs 2 crore in Q1FY13. SMP trimmed its losses as compared to those in the previous year corresponding quarter – the net loss came in at Rs 64 crore, which is lesser than the figure of Rs 67 crore in Q1FY13.

Moreover, the company’s net debt position also improved. At the end of Q1FY14, its books held a net debt of Rs 4244 crore, which was less than that of Rs 4310 crore at the end of Q4FY13.

MSSL’s performance is being driven by robustness in its standalone business, the strong performance of SMR and SMP gradually heading towards a turnaround. We are bullish on the company’s prospects due to the resilience it has shown in a difficult operating environment as well as the potential value unlocking from its subsidiaries.