Hold Motherson Sumi; target of Rs 359: Edelweiss

Edelweiss' research report on Motherson Sumi

Consolidated revenue, at INR 106bn (up 12% YoY), stood 3% below Street’s estimate. India business revenue, at INR 15.6bn, up 24% YoY, was 7% above estimate led by rising content per vehicle. In EUR terms, SMR and SMP maintained revenue traction clocking growth of 15% and 11% YoY, respectively. SMR margins surprised positively at 11.8%, up 220bps QoQ (our estimate of 10.8%), but SMP margin at 5.9% continued to disappoint (our estimate of 7%).

We estimate consolidated EPS CAGR of 23% over FY16-19 with 27% RoE. We lower our FY18E EPS by 9% to factor in lower domestic margins and revised EUR-INR assumptions, and roll over to FY19E with EPS of INR 19. We maintain ‘HOLD/SU’ with TP of INR 359. At CMP, the stock trades at 18x FY19E PER.