Prabhudas Lilladher recommended accumulate rating on Motherson Sumi Systems with a target price of Rs 111 in its research report dated August 13, 2019.
Prabhudas Lilladher's research report on Motherson Sumi Systems
Motherson Sumi Systems' (MSS) Q1FY20 performance were in-line at consolidated level however, standalone margins were lower than expected at 17% (PLe: 18%). With impact of high ramp-up cost of greenfield plants and integration of SMRC subsiding, SMP's margins (2.6% in Q1FY20 v/s 1.9% in Q4FY19) are expected to gradually recover in subsequent quarters. Further, with ramp-up of Tuscaloosa and Kecskemet plant and healthy order book, SMRPBV's revenues is expected to grow at ~10% CAGR over FY19-21E. On the other hand, while management sounded cautious on prevailing demand slowdown in European auto market, it also confirmed MSS has not witnessed any decline/cancellation in orders it has received.
We maintain 'Accumulate' with a target price of Rs111, based upon 18x Mar'21E EPS. At current market price, the stock trades at 19.7x FY20E & 15.6x FY21E Consol EPS.
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