ICICI Direct recommended hold rating on Motherson Sumi with a target price of Rs 100 in its research report dated August 13, 2019.
ICICI Direct's research report on Motherson Sumi
Motherson Sumi Systems (MSSL) reported a steady Q1FY20 performance. Reported consolidated revenues came in at Rs 16,793 crore (up 13.7% YoY). Among subsidiaries, SMR posted flattish constant currency revenue at € 403 million while SMP revenue increased 35% YoY to € 1071 million, backed by greenfield capacity commissioning. Consolidated EBITDA margins expanded 24 bps QoQ to 7.5%, aided by recent lease accounting changes (AS-116). Adjusting for this, EBITDA margins were at 6.9%. Consequent PAT (after minority interest) declined 25.2% YoY to Rs 332 crore.
The company’s strategy of diversification across geographies and products would remain key to navigating the current challenging phase in global auto industry. We value MSSL at Rs 100 i.e. 18x P/E on FY21 EPS of Rs 5.6 with a HOLD rating on the stock.
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