Hold Motherson Sumi; target of Rs 150: ICICI Direct

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ICICI Direct's research report on Motherson Sumi

We attended Motherson Sumi’s (MSSL) virtual investor conference on November 20, 21, in which the company spoke at length about its next five-year plan (2020-25) Vision 2025. We came away with a deeper insight on MSSL’s strategies for the future, each individual vertical and the company, as a whole. MSSL is a leading tier-1 auto ancillary with a presence in 41 countries around the globe through 270+ facilities, having consolidated group revenues of US$10 billion as of FY20. Its offerings include wiring harnesses, mirrors, bumpers, door panels, instrument panels & other polymer & engineering parts (25.3%, 19.4% 15.6%, 12%, 9%, ~18% of FY20 sales respectively). Germany, US, India, France and China (21.9%, 15.8%, 10.6%, 7.7% and 7.2% of FY20 sales, respectively) form the top five geographical markets while top five clients account for ~44% of FY20 sales (Daimler group at 13.9%, Audi at 12.5%, Volkswagen at 8.7%, Renault at 5.2% & BMW at 4.5%).

Outlook

We introduce FY23E numbers and build ~5% sales & ~20% PAT CAGR over FY20-23E. We are enthused by (a) continued focus on higher content per car and (b) clear direction on importance of profitable growth. Our numbers do not factor in inorganic growth and await sustained upturn in greenfield performance before turning decisively positive. Valuing the stock at Rs 150 i.e. 26x P/E on average of FY22E-23E EPS of Rs 5.7, we maintain HOLD.

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