Samvardhana Motherson International Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from Samvardhana Motherson International Ltd (MOTHERSON) Q3 FY24 Earnings Concall

• Financial Performance
  • Revenue growth of 27% YoY to INR 25,700 crores.
  • EBITDA growth of 42% YoY to INR 2,400 crores.
  • Normalized net profit grew 61% YoY to INR 733 crores.
  • Growth driven by automotive industry recovery and acquisitions.
• Macroeconomic Conditions
  • Impact of inflation and geopolitics.
  • Global auto production at pre-COVID levels.
  • Macro environment has stabilizing indicators but inflation and geopolitical conflicts persist as headwinds.
  • Global auto production at run rate of 23.9 million vehicles, on par with pre-COVID levels.
  • Developed markets still lagging while emerging markets propel growth.
• Expansion Plans
  • Setting up 11 greenfield plants in India.
  • Leverage ratio reduced to 1.7x, comfortable liquidity.
  • SAMIL is expanding in India with 11 new greenfield plants to meet growth opportunities.
  • Leverage ratio reduced to 1.7x from 1.9x with comfortable liquidity position.
  • Confident of reducing leverage ratio below 1.6x by year-end.
• Vehicle Model Mix Impact
  • Slower premium vehicle growth.
  • Impacts SMR business segment most.
  • The vehicle model mix has shifted with slower growth in premium vehicle segments.
  • This primarily impacts the SMR business segment the most which has higher share of premium vehicles.
  • SAMIL is supplying all models and seeing overall growth across segments.
• Profitability Drivers
  • Stabilizing costs and efficiencies.
  • Support from customers on cost pressures.
  • Profitability ahead of expectations driven by stabilizing commodity/energy costs and reaching new cost normal.
  • Operational efficiencies and cost reduction initiatives also contributed.
  • Customers provided support on managing cost pressures like wages and geopolitics.
• Interest Cost Outlook
  • Debt reduction to lower interest cost.
  • Impact of refinancing low-cost debt.
  • Interest costs increased due to refinancing low-cost debt at higher current rates.
• Suez Blockage Impact
  • Minimal impact currently.
  • Potential for increased costs and delays.
  • The blockage of Suez Canal has minimal impact currently on operations.
  • Majority of production is located close to customers so limited exposure.
  • However, could increase shipping costs and lead times for some routes.
• M&A Opportunities
  • Refinancing creating opportunities.
  • Acquisitions driven by customers.
  • With refinancing pressures, more M&A opportunities may arise as indicated by market trends.
  • Expect momentum in M&A to continue if these opportunities guided by customers come up.
• SaaS Integration and Strategy
  • Integration completed smoothly.
  • Combined end-to-end solution and new business.
  • SaaS integration completed smoothly without customer disruptions.
  • Allows combined end-to-end solution from design to delivery for cockpit modules.
  • Bidding on new programs with customers based on expanded portfolio capabilities.
  • Aim is to improve margins further through vertical integration.
  • Focus is now on extracting synergies within Motherson’s portfolio.
• Truck Demand Outlook
  • Truck demand in Europe expected to soften compared to current levels.
  • US truck demand continues to remain strong for now.