India’s auto parts maker targeting Brazil, China to boost sales


Motherson Sumi Systems is following its clients including Volkswagen and BMW to Brazil where vehicle production capacity is set to rise 50 per cent by 2014. Photo —Bloomberg News

Mumbai: Motherson Sumi Systems, India's biggest auto parts maker, is targeting emerging markets including Brazil and China to meet its $5 billion sales target as vehicle deliveries at home drop.

The company that's 25 per cent owned by Sumitomo Electric Industries forecasts sales will increase 84 per cent in the year starting April 1 from Rs147.8 billion ($2.7 billion) in the 12 months ended March 31, says chief operating officer Pankaj Mital.

The supplier of rear view mirrors, bumpers and body panels to Porsche Automobil and Volkswagen is adding capacity in China, Thailand, Mexico and Brazil to reduce dependence in Europe and in India, where vehicle sales are poised to drop for the first time in a decade.

Motherson is following its clients including Volkswagen and Bayerische Motoren Werke (BMW) to Braz  replacement in developed countries, new volumes will come from developing countries."

Automakers last year delivered 3.8 million vehicles in Brazil, the world's fourth-largest auto market, and the country's sales have grown at an average annual rate of over 9 per cent the last five years, according to Brazil's auto manufacturer association Anfavea. The group is forecasting growth of at least 4 per cent this year.

Chinese sales
Auto sales in China, including those of cars and buses, may accelerate this year and surpass 20 million units for the first time, spurred by a rebound in economic growth and urbanisation, state-backed China Association of Automobile Manufacturers said last month. Passenger vehicle sales in China are expected to gain 8.5 per cent to 16.8 million units in 2013, the group said.

Motherson Sumi's shares have risen 68 per cent in the past year making it the second-best performing stock in the Bloomberg Asia Pacific Auto Parts & Equipment Index. They gained 0.1 per cent to Rs200 in Mumbai.

The shares trade at a price-to-earnings ratio of 14.3 times, compared to 10.4 for Johnson Controls, the largest United States auto parts maker and 14 for Japan's Denso.

Chairman Vivek Chaand Sehgal's acquisition of German bumper and dashboard maker Peguform Group from Austria's Cross Industries for €321.5 milelion ($429 million) in 2011 and UK rear-view mirror maker Visiocorp in 2009 is helping the company's drive to boost revenue from overseas.

Loss narrows
Sales at its units including those abroad, now called Samvardhana Motherson Peguform and Samvardhana Motherson Reflectec, accounted for 74 per cent of revenue in the year ended March 31, according to data.

Peguform's loss narrowed to €5.6 million in the three months ended December 31 from €16.2 million a year earlier, according to a company filing. Reflectec turned to a profit of €4.17 million in the nine months to December from a loss of €1.2 million in the earlier period.The company's ability to revive the unprofitable overseas units may help it to increase its return on capital employed to 40 per cent in the year ending March 31, 2015, from 14 per cent in the 12 months to March 31, according to its annual report.
"Globally, they're becoming one of the biggest suppliers to carmakers," said Surjit Singh Arora, an analyst with Prabhudas Lilladher in Mumbai.

"They're on a strong footing as I believe that going forward, their profitability will improve."

BMW, the world's largest maker of luxury vehicles, plans to invest €200 million in a Brazil factory, while Volkswagen is investing €3.4 billion to upgrade its model lineup and factories in the South American nation through 2016.

The firm is adding capacity at its new mirror factories in Brazil and Thailand and is also setting up a plant in China.

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