Buy Motherson Sumi Systems Ltd; target of Rs 378:SPA Research

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SPA research report on Motherson Sumi SystemsMotherson reported mixed set of results with topline coming in at INR 98.6 bn (SPAe: INR 100.5 bn) and PAT at INR 3.1 bn (SPAe: INR 3.4 bn). PAT was below estimate due to lower topline growth, less than anticipated decline in raw material costs and certain one-off expense items. SMP/SMR reported revenue growth of 19.5%/14.3% YoY to Euro 690 mn/369 mn but 6.7% YoY depreciation of Euro against INR arrested the robust growth to only 11.0%/6.3% in rupee terms. The current order book stands at Euro 14 bn (INR 1066 bn). We maintain our BUY rating with a target price of INR 378 based on 12xFY17E EV/EBITDA.ValuationThe demand outlook continues to be strong across US, Europe and India. In MSSL's next phase of growth, North America is likely to be the highest incremental revenue contributor, followed by Europe. With improvement in overall business through ramp up of new plants and increase in utilization levels, we expect MSSL's consolidated revenues & profits to report CAGR of ~14.7% &~30.7% respectively between FY15- 17E. Motherson might be slightly affected from the VW issue in the near term but we do not expect any major impact in the long term as OEMs tend to recover from the hit of recall and MSSL too is targeting to increase its market share across OEMs (thereby reducing its dependence on any single OEM) worldwide led by highly competitive andexpanding product portfolio. We maintain our BUY rating with atarget price of INR 378 based on 12xFY17E EV/EBITDA.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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