Buy Motherson Sumi; target of Rs 300: Emkay Global Financial

Emkay Global Financial's report on Motherson Sumi

At its analyst call, management reiterated that the proposed restructuring exercise aligns the interests of all stakeholders, and is earnings-accretive for minority shareholders. Management re-emphasized expectations of better content per vehicle, helped by increasing EV penetration, in both the entities – MSWIL (domestic wiring harness business) and SAMIL (new name for existing listed entity after the de-merger of domestic wiring harness business and merger with parent entity). Key takeaways: SAMIL shares will trade ex-MSWIL from 14th January. The merger with the promoter entity is expected to take place on 24th January. MSWIL’s listing is expected in mid-March, subject to regulatory approvals. Led by restructuring, EPS accretion is expected for minority shareholders. In the past 12 months ending Sep’21, EPS accretion stood at ~5%.

Outlook

Retain Buy with a TP of Rs300 (23x Dec’23E EPS). We expect robust growth prospects for MSS in the medium term, driven by expectations of a cyclical upturn in the underlying Auto segment in domestic/global markets and increasing content per vehicle due to premiumization/electrification.