Motherson Sumi Systems Ltd Q3 FY22 Earnings Conference Call Insights

Key highlights from Motherson Sumi Systems Ltd (MOTHERSUMI) Q3 FY22 Earnings Concall

Q&A Highlights:

• Binay Singh of Morgan Stanley asked about PKC’s compressed margins and what part of it is driven by mix and what is driven by any one-off costs. Pankaj Mital COO said that in PKC, the company has been hit in two geographies, one is in China and the other from North America, where the volumes dipped and the supply chain issues became more and more pronounced in the last quarter. China volumes remained low in both the quarters compared to the past by about 60%.

• Jinesh Gandhi from Motilal Oswal enquired that if it’s fair to say that China business is largely through JV and hence would not have impacted EBITDA margin for PKC. Pankaj Mital COO replied that it does impact, because out of the three JVs, two are consolidated.

• Jinesh Gandhi from Motilal Oswal also asked if there will be any copper price related impact in PKC or rather for entire wiring harness business.  Pankaj Mital COO answered that copper price impact has also been there because every 6 months, the prices get adjusted based on the past trends. However, the kind of impact, which is there in the past 6 months has reduced, but still there is a copper lag, which continues.

• Jinesh Gandhi from Motilal Oswal asked about the margin impact on SMR and the reason for it. Rajat Jain COO SMR said it’s been a mix of issues. The volume were impacted because of the chip shortage, which was the primary driver. Also there were headwinds on commodities. It’s a combination of various factors. However, the company expects improvement going forward as sales go up.

• Jinesh Gandhi from Motilal Oswal enquired about the EDI volume trend going forward. Rajat Jain COO SMR answered that for the immediate short term, the visibility in EDI looks better. But there are surprises which keep coming all the time.

• Raghunandhan from Emkay Global asked if there has been any impact on margins due to higher Europe gas energy costs going higher. Laksh Vaaman VC replied that there have been energy cost increases, which were substantial and definitely, the impact like power is different for different verticals, so not as much as perhaps some of the other verticals that are there.

• Chirag Shah from Edelweiss asked about the SMR and SMP profitability and if the drag on margin is largely because of commodity. Laksh Vaaman VC answered that it’s different by different product group. Generally, end of the year, the company goes back to the customers and then talk about the movements in the prices of commodities over the year. The company envisages that towards the end of this quarter, a lot of those things will come back to normal.

• Chirag Shah from Edelweiss also asked if it’s Q1 of calendar year that the discussion with customer happens Laksh Vaaman VC said it’s a running discussion, but it happens more because there’s a lot of other things that are also happening like the price downs for the year-on-year.

• Chirag Shah from Edelweiss enquired when the normalization can be achieved, given the supply chain bottlenecks and interactions with the customers. Laksh Vaaman VC replied that the company is hoping that in the next 6 months, things will be a lot more stable as from where it’s right now.