Buy Motherson Sumi; target of Rs 500: IIFL

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IIFL`s research report on Motherson Sumi Systems

“During the past couple of years, automobile market in India saw tough times with volumes declining across segments. With diesel price hikes behind us, interest rate not expected to increase from here on, hopes of recovery in industrial activity and a positive consumer sentiment, we expect auto volumes to recover from H2 FY15 and gain further strength in FY16 and FY17. During the lull phase of auto OEMs in India, Motherson was able to protect its revenue base and profitability as it increased its market share by enrolling new customers and increasing content per car by adding new products to its profile. Going ahead too, we expect Motherson with its strong OEM relationships will post a higher than industry average topline growth.” “Motherson Sumi is now a leading global auto component player with presence across 25 countries. In the domestic market, when auto sales were declining in the past two years, Motherson weathered the storm through increasing content per car. Its acquisitions SMR and SMP have reported outstanding recovery from the strained levels seen when they were acquired. Going ahead, domestic business will see strong traction as demand recovery is seen from H2 FY15. Recovery in US and stability in Europe are expected to benefit SMR and SMP substantially which are already sitting on new orders worth €4bn. With track record of meeting its five year targets, we will be keenly watching FY20 targets it will set for itself at the end of FY15. For FY14‐17E, we expect Motherson to report earnings CAGR of 41%. Buy Motherson Sumi Systems with a target of Rs 500 ,” says IIFL research report.

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