Hold Motherson Sumi Systems; target of Rs 417: Edelweiss

Edelweiss' research report on Motherson Sumi Systems

Motherson Sumi’s (MSS) Q4FY17 consolidated EBITDA, at INR 12.4bn (up 25% YoY), was in line with our and Street’s estimates. India business revenue outlook continues to improve led by increasing share of business from key clients and rising content. BS-VI transition in 2020 should aid wiring harness business.

Outlook

For SMR and SMP, we forecast revenue CAGR of 14% each and estimate consolidated EPS CAGR of 33% over FY17-19 with 26% RoE. We maintain ‘HOLD/SU’ with TP of INR 417 (India business 25x, SMR/SMP 15x FY19E PER). We have also valued PKC at INR 30 (0.7x EV/sales). At CMP, the stock trades at 21.4x FY19E PER.