Accumulate Motherson Sumi Systems; target Rs 210: Emkay

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Accumulate Motherson Sumi Systems; target Rs 210: Emkay

Emkay Global Financial Services is bullish on Motherson Sumi Systems and has recommended accumulate rating on the stock with a target price of Rs 210 in its February 13, 2012 research report.

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Emkay Global Financial Services is bullish on Motherson Sumi Systems and has recommended accumulate rating on the stock with a target price of Rs 210 in its February 13, 2012 research report.

"Motherson Sumi Systems, EBIDTA at Rs 2.6bn was in line (est. Rs 2.5bn). APAT at Rs 1.2bn was above est. of Rs 885mn due to lower tax rate. SMR reports 150bps QoQ margins expansion with higher utilization. Peguform reports Sales/Adj. EBITDA/APAT of Rs11.5bn/Rs 43mn/ Rs -156mn for 38 days. Peguform to be EPS accretive but not assigning value due to limited information. Concerns with Debt overdone. Net Debt (ex Peguform) is Rs 16bn (marginally up QoQ). Of the total gross debt of Rs 29bn of Peguform, debt attributable to MSSL is only Rs 11bn."

"MSSL reported gross debt of Rs 46bn, which has raised concerns regarding the balance sheet of the company. We believe that concerns are overdone as net debt pertaining to existing business has marginally increased QoQ to Rs 16bn. Also of the total debt pertaining to Peguform of Rs 29bn, only Rs 11bn is attributable to MSSL. Of this there is recourse to Rs 6.5bn (debt taken to fund the acquisition). Peguform has an operating debt of Rs 16bn, for which there is no recourse to MSSL."

"At CMP of Rs 174, the stock trades at PER/EV-EBIDTA of 11.2x/7.3x our FY13 estimates. We retain our FY12/FY13 EPS at Rs 10.4/Rs 15.5 per share and retain our ACCUMULATE rating on the stock with a target price of Rs 210. Peguform can potentially add Rs 0.6 earning per share to MSSL in its second year of operation (refer to table below). We have not factored in Peguform in our estimates due to limited availability of information," says Emkay Global Financial Services research report.

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