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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.
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