Nomura initiates buy rating on Motherson Sumi, sees potential upside of 19.2%

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26 Aug, 2025 12:21

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Brokerage firm Nomura Research initiated a buy rating on Motherson Sumi Wiring India Ltd with a target price of Rs 62 a share, implying 19.2 percent returns from the current levels.

Motherson Sumi Wiring was founded following a demerger from Samvardhana Motherson International. The company has established itself as a dominant player in India’s wiring harness segment, commanding an estimated 45 percent market share as of FY22.

It benefits from advanced technology and expertise through its association with Sumitomo Wiring Solutions, which not only holds a significant 25 percent stake in Motherson Sumi but is also a leading global provider of wiring harness solutions.

Nomura says that the wiring harness (WH) content in vehicles has experienced a significant increase, from approximately 2.5 percent in the past to approximately 4.5 percent at present. This rise has driven an impressive 10 percent revenue compound annual growth rate (CAGR) over the past decade, despite only a 2 percent CAGR in OE car sales volume.

“Based on these trends, we estimate a robust 15 percent revenue CAGR for Motherson Sumi between FY23 and 25F. We anticipate a 7 percent CAGR in domestic car sales volume, given the current market environment,” Nomura report said.

Nomura anticipates that Motherson Sumi’s EBITDA (earnings before interest, taxes, depreciation and amortisation) margins will increase from 10.9 percent in FY23F to 12.7 percent in FY25F, driven by operating leverage, resulting in a projected 27 percent earnings per share (EPS) compound annual growth rate (CAGR). Additionally, the company’s limited capital expenditure (capex) intensity is expected to lead to a robust return on equity (ROE) of approximately 46 percent by FY25F. Premiumisation by major customers such as Maruti Suzuki India Ltd, along with the accelerated adoption of electric vehicles (EVs) in India, could serve as critical catalysts for Motherson Sumi's stock, the brokerage expects.

“At present, the stock is trading at approximately 29 times FY25F EPS, which we deem as appealing. As a result, we value Motherson Sumi at 35 times FY25F EPS, supported by our discounted cash flow (DCF) valuation analysis. Given the company’s high growth prospects, expanding market share in the EV sector, and superior ROEs, we anticipate MSUMI’s premium valuations to remain sustainable,” Nomura report added.