On Tuesday, Nomura/Instinet updated its outlook on Motherson Sumi Wiring India (MSUMI:IN), raising the price target to INR 85.00 from the previous INR 81.00, while reaffirming a Buy rating for the stock. The adjustment follows the company's first-quarter financial results for the fiscal year 2025, which showed earnings before interest, taxes, depreciation, and amortization (EBITDA) slightly trailing the firm's and the consensus estimates.
For the quarter, Motherson Sumi Wiring India reported a revenue of INR 21.8 billion, marking a year-over-year increase of 17%. This figure was marginally below Nomura's projections by 2% but surpassed the Bloomberg consensus estimate by the same margin. The passenger vehicle industry, to which the company is closely linked, saw a production increase of 6% year-over-year during the same period.
The company's EBITDA margin came in slightly lower at 10.9%, compared to Nomura's expectation of 11.7% and the consensus of 12.1%. This resulted in a 15% year-over-year growth in EBITDA. The moderate shortfall in EBITDA margin was primarily attributed to a quarter-over-quarter surge in staff costs, which rose to 17.2% of sales, higher than Nomura's anticipation of 16.7%. However, the cost of raw materials as a percentage of sales held steady at 65.1%, aligning with forecasts.
Motherson Sumi's profit after tax (PAT) for the quarter was INR 1.5 billion, an increase of 21% from the previous year. The company's management highlighted significant developments, including a 50% year-over-year growth in revenue from electric vehicles (EVs), including hybrids, which now account for approximately 5% of total revenue. Additionally, a new greenfield plant commenced operations in July 2024, with another set to start in the first quarter of the fiscal year 2026. The initial costs associated with these plants, particularly in staffing and overheads, had an impact on the costs for the quarter. The company also noted the effect of higher copper prices, which have since declined, on raw materials costs. Motherson Sumi does not engage in hedging for copper prices and passes on the costs related to the Japanese yen to customers with a time lag.
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