Motherson Sumi - Company Update - ICICI Securities

We attended Motherson Sumi's (MSSL) virtual investor conference about the top businesses in the promoter entity, Samvardhana Motherson International (SAMIL). The meet was informative with all business heads explaining their respective businesses in detail, the margin and RoCE profile that they operate in, the customer segment that they cater to, growth opportunities that lie ahead and also shared their journey towards attaining the group target of 40% RoCE in their respective businesses in due course of time. We were particularly enthused by SAMIL's lighting business (ahead of industry in terms of share of revenues in the LED segment) as well as other businesses that are likely to gain traction due to constant up-gradation in safety norms worldwide. As part of MSSL's corporate restructuring exercise, MSSL would be merging SAMIL into itself by acquiring the latter's other lines of business in auto ancillary and other support functions. This would consolidate all the group's automotive businesses in the present listed entity (ex-domestic wiring harness division, which would be listed separately on exchanges).

Valuation & Outlook

MSSL is a global auto ancillary player with varied exposure to different geographies, foreign currencies and product profile. MSSL's product profile is, however, less prone to EV risk as it is primarily into plastic products, mirrors, wiring harness, metal products among others. Given the complexities, healthy valuations at which it trades i.e. ~21 P/E, ~3 P/B with the return ratios metrics of mid-teens on FY22E numbers, we see limited upside to our target price calculation. We value MSSL at Rs. 120 i.e. 22x P/E on FY22E EPS of Rs. 5.4 and retain our HOLD rating on the stock. For simplicity we have retained MSSL numbers (ex-corporate restructuring) and P/E valuation methodology which depicts the same target price as our SOTP based fair value calculation exercise incorporating restructuring (Exhibit 14).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_MothersonSumi_CoUpdate_Oct20.pdf

Shares of MOTHERSON SUMI SYSTEMS LTD. was last trading in BSE at Rs.113.65 as compared to the previous close of Rs. 121.05. The total number of shares traded during the day was 874839 in over 6121 trades.

The stock hit an intraday high of Rs. 122.2 and intraday low of 110.9. The net turnover during the day was Rs. 100115291.

Source : Equity Bulls

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