Buy Motherson Sumi Systems target of Rs 311: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Motherson Sumi Systems

MSS 4QFY21 results were operationally in-line as EBITDA grew 24% YoY to Rs17.2b (PLe Rs17.7b) with margins at 10.1% (+90bp YoY, PLe 10.7%) led by continued healthy performance in key global businesses. SMRP BV’s healthy order book at Eur15.6b (with Eur4.5b new orders won in 2HFY21) will drive healthy revenues over FY22-24. Sound working capital management and controlled capex led consol net debt to decline by Rs48b in FY21 (v/s Rs69b in FY20). We expect deleveraging to continue for organic business as strong order book at SMRPBV doesn’t entail any significant capex. We upgrade FY22/23 consol EPS by 15.5%/11.5% to factor in strong order wins at SMRP BV.

Outlook

Maintain BUY with revised TP of Rs311 (vs Rs249) as we raise target multiple to 28x (in-line with 10yr LPA, v/s 25x earlier) to factor significant increase in return profile and increased EV penetration.

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