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.