Investment Opportunity in Motherson.
Firstly we need to analyse the ratios of the company so
as to predict the performance and investment
opportunities in the company.
Ratio
FY 202223
FY 202122
P/E
P/B
27.234 1.865
P/CF
9.793
P/Sales
0.584
41.227 2.178
19.781 0.774
1. P/E ratio
The price-to-earnings (P/E) ratio is the ratio for valuing a
company that measures its current share price relative to
its per-share earnings.
2. P/B ratio
Price to tangible book value (PTBV) measures a company's
market value relative to its hard or tangible assets
reported on its balance sheet. Should be under 1.0.
3. P/CF ratio
The price/ cash flow ratio is a ratio used to compare a
company's market value to its cash flow.
4. P/SALES ratio
It is calculated by dividing the company's market
capitalization by the revenue in the most recent year; or,
equivalently, divide the per-share stock price by the pershare revenue.
As per the ratios compared to the previous year ratios, we
can say that there is a market correction and all the ratios
suggest that there is a good time to have a stake on this
share.
BUY
Considering the impact of accounting for Composite Scheme
of Amalgamation and Arrangement.
(i) Ratios for the period ended March 31, 2022 have been
calculated after considering relevant amounts pertaining only
to continuing operations, hence the ratio is not strictly
comparable.
(ii) Debt service coverage ratio has decreased due to higher
amount of long-term borrowing maturing in the next twelve
months as compared to FY 2021-22.
(iii) Return on Equity ratio has improved due to increased
profit of the Group compared to FY 2021-22.
(iv) Net Capital Turnover Ratio, has decreased due to higher
revenue in FY 2022-23 and also due to increased current
maturity of long-term borrowings impacting the working
capital for the FY 2022-23.
(v) Net Profit ratio has improved due to increase in profit for
FY 2022-23 as compared to FY 2021-22.
(vi) Return on Capital Employed has improved because of
increase profit of the group as compared to FY 2021-22.
(vii) Return on investment ratio has decreased because of
Group’s share in losses of investment in entities accounted as
per equity method during FY 2022-23.
Analysis of Current Ratio, Stock and Receivables
Current Ratio of Samvardhana Motherson International Ltd.
with value of 0.973 indicates the company has insufficient
current assets to pay off short-term debt obligations.
The value of inventories has increased by Rs.13,811 million.
There is an increase on account of carrying safety stock for
customers due to supply chain issues and volatility in
customer production schedules. This could be because the
company is expecting higher demand for the products. Trade
receivables (current assets) has increased by Rs.19404 million
and trade receivables (non-current assets) has decreased by
Rs.1272 million which means that some of the debtors have
paid during the year. Accounts receivables is moving in line
with sales as revenue from operations has also increased.
The reasons for increase in accounts receivables could be
because of increase in sales or a lenient credit policy.
Analysis of Profitability Ratios:
The Gross Profit Margin has been on the higher side, it means
that the direct expenses related to manufacturing are well
under control and that the firm is managing the stock of raw
materials efficiently, although the GP margin has gone down
by 0.4%, it can be attributed to inflation. The Net Profit
margin is where things start going downhill. The firm has too
little of a net profit, if compared to the revenue it generates.
The firm has improved on its net profit margin wrt previous
year. The