Buy Motherson Sumi; target of Rs 240: Nirmal Bang

Nirmal Bang is bullish on Motherson Sumi Systems (MSSL) and has recommended buy rating on the stock with s target of Rs 240 in its September 21, 2012 research report.

“Motherson Sumi Systems was incorporated in the year 1986 as a joint venture between Samvardhana Motherson Finance Limited ( SMFL, Sumitomo Wiring Systems and Sojitz Corporation, Japan. The company was incorporated with the objective of manufacturing integrated wiring harnesses, wires, high tension cords and components for integrated wiring harnesses including plastic and metal parts.  Motherson Sumi is a world-class supplier of high performance components, modules and systems. The company is the largest supplier of EDS to the Indian automotive industry. It offers a range of products in the field of electrical distribution systems, plastic moulding, elastomers processing, tooling, metal machining, automotive rear view mirrors and integrated modules. The company also provides a range of services from design to manufacturing, supplies to logistics to its customers in India and abroad.” 

“MSSL has an impeccable track record with regard to turning around acquisitions (Visiocorp, now SMR) in the past. We are confident of the fact that the management will replicate the same performance in case of SMP also, going forward ( initial signs of improvement seen with EBITDA margin improving from 1.6 per cent to 4.2 per cent on a q-o-q basis)   MSSL is gradually inching towards vision 2015 and has performed on all parameters except RoCE. We expect the RoCE to improve over the next 2-year period on the back of signification traction from the acquired company, Peguform (now SMP).   MSSL has grown its revenues at a CAGR of more than 35 per cent over the last decade but the corresponding equity dilution during this period stands at ~10 per cent only “

“We expect MSSL to post net sales of Rs.25550 crore in FY’13E with a PAT of Rs.254.5 crore. This translates into an EPS of Rs.9.7. The company should post net sales of Rs.27560 crore in FY’14E. This, coupled with an improvement in overall margins should lead to a PAT figure of Rs.667.9 crore, translating into an EPS of Rs.17. At the present price, the stock is available at less than 13x FY’14E earnings. We recommend a buy with a target price of Rs.240 over the next six months,” says Sushil Finance research report.

Non-Institutions holding more than 90% in Indian cos

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