Accumulate Motherson Sumi Systems; target of Rs 153: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Motherson Sumi Systems

(MSS Q3FY20 consolidated performance were mixed with consol margins were in-line at 7.9% (PLe 8.1%), with continues margin expansion at SMP at 4.8% (PLe 4.5%) led by ramp-up at greenfield plants. While S/A performance beat expectations with EBITDA margins at 15% (PLe 14.5%, flat YoY/QoQ), EBITDA margins at SMR/PKC were weak at 10.6% (PLe 11%)/ 9.5% (PLe 10%). Going ahead with further ramp-up of greenfield plants, healthy order book at Eur18.4b (as of Sep-19 including new orders of Eur3.8b in 1HFY20) and SOP (start of production) of Eur3.7b orders in 1HFY20, SMRPBV's revenues is expected to grow at ~11.7% CAGR over FY19-21E. On the other hand, while management indicated it is yet to know impact of Corona virus, they also indicated none of MSS plants have taken any shutdown due to the same as yet. While we see near term weak performance at PKC and SMR, we believe SMP to continue lead the recovery.

Outlook

Therefore, we maintain the stock to 'Accumulate' with a target price of Rs153 (earlier Rs160), based on 19x Mar'22E EPS. We downgrade FY21/22 EPS by 5% each to factor in for higher depreciation and weak performance at SMR and PKC.

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