Earnings Review
Samvardhana Motherson posts strong growth, but misses view
This story was originally published at 19:44 IST on 12 November 2024
Register to read our real-time news.Informist, Tuesday, Nov. 12, 2024
Please click here to read all liners published on this story
--Samvardhana Motherson Jul-Sept consol net profit INR 8.80 bln
--Analysts saw Samvardhana Motherson Jul-Sept consol net profit INR 9.10 bln
--Samvardhana Motherson Jul-Sept consol PAT INR 8.80 bln vs INR 2.02 bln
--Samvardhana Motherson Jul-Sept consol sales INR 278.1 bln vs INR 235.3 bln
--Samvardhana Motherson Apr-Sept consol PAT INR 18.74 bln vs INR 8.02 bln
--Samvardhana Motherson Apr-Sept consol sales INR 566.8 bln vs INR 459.9 bln
--Samvardhana Motherson Jul-Sept consol normalised EBITDA INR 24.63 bln
--Samvardhana Motherson Jul-Sept consol normalised EBITDA up 23% on year
By Darshan Nakhwa
MUMBAI – Samvardhana Motherson International Ltd. on Tuesday reported strong on-year growth in earnings for the September quarter, but its numbers failed to meet analysts' estimates. The on-year growth in key earnings metrics came on the back of improvement in all business divisions despite a volatile business environment, contributions from recent acquisitions, and operational efficiencies.
In Jul-Sept, the company's consolidated bottom line more than quadrupled on year to INR 8.80 billion. Brokerages had pegged the metric at INR 9.10 billion for the quarter. Samvardhana Motherson reported a massive jump in the metric as an exceptional cost had weighed on its net profit in the year-ago period. In Jul-Sept 2023, the company had incurred an exceptional cost of INR 2.50 billion due to "phased operational restructuring of certain automotive capacities located in Europe". Without this exceptional expense in the year-ago period, the company would have reported a 95% on year growth in net profit for the September quarter.
The company's bottom line growth was also supported by a manifold increase in profit contribution from associates and joint ventures, and other income. The share of profit from associates and joint ventures, net of tax, was INR 1.84 billion, up from INR 738.4 million in the year-ago period. Its other income came in at INR 2.59 billion, up from INR 664 million in the Jul-Sept 2023.
The company's earnings before interest, tax, depreciation, and amortisation was INR 26.41 billion, up 32% on year. Brokerages had pegged it at INR 26.82 billion. The company's normalised EBITDA for Jul-Sept was INR 24.63 billion. The normalised EBITDA refers to reported EBITDA less one-time fair valuation gain of INR 1.78 billion included in other income on account of the acquisition of controlling interest in one of the joint venture entity i.e. Motherson Auto Solutions Ltd. in Jul-Sept.
Samvardhana Motherson's EBITDA margin expanded to 8.9% from 8.5% in the year-ago period. It maintained the profitability of its organic business with focused operational measures despite fluctuations in vehicle production. The September quarter saw subdued automotive production on weaker demand for electric vehicles in Europe, which also resulted in delayed launches. Globally, commercial vehicle production volumes saw a de-growth of 6% during the quarter, which was sharper in North America as well as in India. In China, the automotive market is seeing a shift of market share from international players to domestic manufacturers.
In Jul-Sept, the company's total revenue from operations rose 18% on year to INR 278.12 billion led by healthy performance across divisions. Analysts had estimated the company's top line at INR 282.60 billion.
The modules and polymer products business contributed the most to the company's top line in Jul-Sept, with a 45% share. The segment revenue growth was supported by the full impact of the acquisitions of Dr. Schneider Group and the Yachiyo four-wheeler business, the company said in an investor presentation. In the September quarter, the share of wiring harnesses, vision systems, integrated assemblies and emerging businesses to the total top line was 25%, 15%, 7% and 8%, respectively.
Samvardhana Motherson's revenue from acquired assets was INR 61.99 billion in Jul-Sept, compared to INR 18.51 billion in Jul-Sept 2023. Despite industry degrowth on a year-on-year basis, organic business was resilient, implying 4-5% growth over market, the company said. The auto components maker has diversified across customers and geographies, with the top 20 clients accounting for 75% of revenue, and emerging markets contributing 50% to the top line. Five out of Samvardhana Motherson's 19 greenfield projects are onstream, and the rest at various stages of completion, the company said.
"These results highlight our strength and adaptability in an uncertain business environment. Our prudent management of the leverage ratio has positioned us well for sustainable growth," Chairman Vivek Chaand Sehgal was quoted as saying in a press release. "This strategic approach ensures that we maintain a healthy balance sheet while continuing to invest in the future. Our automotive booked business is approximately $88 billion and has been growing consistently... Our non-automotive businesses have been growing consistently, contributing to overall growth with stability and diversification," he said.
On Tuesday, shares of Samvardhana Motherson ended 5% lower at INR 166.04 on the National Stock Exchange, after its earnings failed to live up to analysts' expectations.
In the September quarter, the company's total expenditure rose 18% on year to INR 270.13 billion led by costs relating to raw materials, employee benefits, depreciation and other expenses. The cost of materials grew 11% on year to INR 148.66 billion, followed by employee-related costs, which increased by 26% on year to INR 68.83 billion, and other expenses rose 24% on year to INR 33.99 billion. Further, its finance costs rose 12% on year to INR 5.46 billion. The tax outgo for the quarter was INR 2.94 billion, compared to INR 2.29 billion in Jul-Sept 2023.
On a sequential basis, Samvardhana Motherson reported a weak financial performance. While its net profit declined by 12%, its top line was down by 4% on quarter. For Apr-Sept, the company clocked a net profit of INR 18.74 billion, up 134% on the year, and its revenue from operations came in at INR 566.80 billion, up 23% on year.
During Apr-Sept, the company incurred a capital expenditure of INR 20.24 billion, and has recalibrated its strategy by reducing the capex guidance to INR 50 billion. In the September quarter, the company's net debt declined to INR 104.96 billion, from INR 133.70 billion at the end of the June quarter. The company's cash and bank balance rose to INR 123.23 bln rupees from INR 67.44 billion at the end of last quarter. End
Edited by Ashish Shirke
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
