Q3FY21 consolidated rev/ebitda of Rs179.2 billion/ Rs20.4 billion have been sharply ahead of our forecasts (Rs 171 billion/ Rs 16.5 billion) and Bloomberg consensus (Rs167.3 billion/ Rs 16 billion) estimates. The powerful show was across segments. Ebitda margins at 11.4% have been larger than our (9.6%) and consensus (9.6%) estimates. Standalone income was at Rs 20.7billion +26% y-y and margins have been rather powerful at 18.4% (Nom 15.5%). Ebitda margins for SMP/SMR/ PKC also beat estimates at 9.5% /13.2% /9.4% (Nomura: 7.6% / 11.5% / 8.5%).
Our view: EV order-book mix stands at ~21% for SMRPBV as of September 2020. This increases our self-confidence that medium-term earnings development for MSS can be significantly larger as EVs will swiftly acquire sector share and content per auto and profitability will rise as most of the upcoming EVs are function-wealthy premium autos. In India as properly, there will most likely be a more speedy race amongst auto makers to differentiate their autos by constantly adding new options. Thus, MSS will maintain expanding properly ahead of the sector, in our view. MSS management has utilised the lockdown properly to structurally lessen fees, which need to also advantage medium-term margins.
Semiconductor shortage is a quick-term danger, but we think that there is powerful pent-up auto demand globally, and production need to rebound strongly. Estimates: We now anticipate income development and margins for FY21-23F at standalone (-7%/+32%/15%, 14.2%/17.6%/19.6%), 2) SMP: (-10%/+23%/+8%, 6.1%/ 9% / 10.5%, 3) SMR (-15%/ +20%/+6%, 11.1% /12.5%/13%), PKC (-11/ 23%/+12%, 7.4%/ 9.3% /9.8%). Overall, we raise consolidated income by ~4% /9% /9% and EPS by 118% /44% /42% more than FY21-23F. This implies a powerful 46% EPS CAGR for FY20-23F.
Valuation: Raise target value to Rs252, based on 22x FY23F EPS. The stock trades at ~17.2x FY23F EPS of Rs 11.5. We raise our target P/E from 20x to 22x on Mar-23F, which is the mid of the anticipated trading band of 20-25x to aspect in MSS’s potential to develop ahead of the sector, to arrive at our larger TP of Rs 252. Acquisitions can give additional upside. MSS is our major choose in auto elements.