Buy Motherson Wiring; target of Rs 70: Motilal Oswal

Motilal Oswal's research report on Motherson Wiring

Motherson Sumi Wiring (MSWIL)’s FY23 annual report underlined its focus on leveraging the electrification trend, localization, and maintaining ROCE >40% (~42.7% pre-tax in FY23). It has consistently taken proactive approach to capacity expansion and R&D initiatives and added three new facilities this year, which are expected to reach optimum utilization in FY24. Its focus on electrification is reflected in adding a dedicated line for producing EV and high-voltage wire harnesses in Chennai. FY23 was operationally challenging for MSWIL, as its EBITDA margin contracted ~190bp YoY to 11.1%, due to multiple headwinds. However, we expect gradual recovery in the operating performance starting from 2HFY24, led by increased utilization of the new plants and stable copper prices. We believe it deserves rich valuations driven by a) its strong competitive positioning, b) top decile capital efficiencies, and c) it being a beneficiary of EVs and other mega trends.

Outlook

The stock trades at 39.7x/31.6x FY24E/25E EPS. We reiterate our BUY rating on the stock with a TP of INR70 (~35x Sep’25E EPS).