Accumulate Motherson Sumi; target of Rs 406: Prabhudas Lilladher

Prabhudas Lilladher's research report on Motherson Sumi

Motherson Sumi (MSS), through its subsidiary SMRP BV, will acquire Reydel Automotive from Cerberus capital management. Reydel Automotive is in the same line of business as SMP, i.e., instrument panels, door panels, console modules, etc., with presence across Europe (66% of revenues), Asia (28%) and South America (6%). Purchase price for the transaction is at US$201mn for 100% equity stake, implying an attractive valuation at EV/EBITDA multiple of 2x and EV/sales of 0.13x. The transaction is expected to close over the next six months, with the acquisition to be EPS accretive from day one.

Outlook

With this acquisition we see an upside risk of ~4% increase to our EPS estimates.  We maintain 'Accumulate' with a price target of Rs406, based upon 24x Mar'20E EPS. At CMP, the stock trades at 27.8x FY19E & 19.6x FY20E Consol EPS. For all recommendations report, click here

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