06 Jun , 2021 By : Kanchan Joshi
Despite short-term impact on production in India due to the second wave of covid-19, Motherson Sumi Systems Ltd (MSS)—one of the country’s largest auto parts maker—will continue to growth its business due to recovery in vehicle production in markets like China, US and Europe, and the company’s strong position in electric vehicles. Recovery in India business, especially in the second half of the fiscal, is expected to boost earnings further.
“All key businesses are on the cusp of a cyclical recovery, with India passenger vehicles (PVs), global PVs, and US/EU commercial vehicles well placed for a recovery in FY22E. MSS enjoys strong positioning in its respective product categories, and would benefit from this expected cyclical recovery. This would drive operating leverage, particularly in its overseas businesses," said analysts of Motilal Oswal Institutional Equities.
They also added that the wiring harness business in India is likely to grow faster than the PV industry, led by an increase in content (due to ongoing premiumisation). BS-VI transition has also increased the complexity of wiring harnesses and increased value by 10-20% and opened the two-wheeler segment for the company as well.
Motherson reported a 290% year-on-year (YoY) increase in consolidated net profit of Rs714 crore for the quarter ending March 31, as vehicle production returned to pre-covid level in India and foreign markets.
Due to recovery in business, the revenue from operations during the quarter improved by 19% YoY to Rs17,844 crore. The operating profit or earnings before interest, tax, depreciation and amortization (EBITDA), also jumped by 44% YoY to Rs2,006 crore due to the overall improvement in sales and costing cutting measures taken by the company.
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