- 21 Dec 2022
- ICICIdirect Research
YEN APPRECIATES CONSEQUENT TO MONETARY POLICY ACTION IN JAPAN
Japanese currency, Yen, appreciated sharply yesterday by 3.5% against the rupee with closing JPR/INR rate at 0.625 vs. the current quarter average of 0.577.
MSIL's direct exposure to Yen is pegged at ~3% of sales with indirect exposure pegged at ~85 billion Yen taking the total Yen exposure to ~8% of sales. The company witnessed a 50 bps margin expansion in Q2FY23 consequent to 8% depreciation of the Yen against the rupee in the preceding quarter with the trend suggesting Yen depreciation to benefit in Q3 as well as Q4FY23 albeit at a lower scale. However, if the current JPR:INR rate sustains for Q4FY23 (implied appreciation of ~8% QoQ) then MSIL is likely to witness a 50 bps margin compression in Q1FY24. The exact impact, however, could be limited given the company has already announced a fresh price hike starting January 2023 amid muted raw material pricing scenario. We believe the stock already factors in this scenario and has been down ~10% since the last quarterly results.