Motilal Oswal is bullish on Motherson Sumi has recommended buy rating on the stock with a target price of Rs 144 in its research report dated June 11, 2019.
Motilal Oswal's research report on Motherson Sumi
While underlying automotive trends are not supportive, MSS has been impacted by ramp-up issues at its recently commissioned plants (particularly the Tuscaloosa plant). These issues are transient in nature, partly due (a) teething trouble for the large greenfield plant and (b) visa-related issues. We expect a strong recovery as these plants drive growth based on orders on hand. MSS in on right side of global megatrends in the automotive industry, which will drive a further increase in content. This, coupled with disciplined capital allocation toward value-accretive acquisitions, would add to the organic growth potential.
Outlook
However, the EU business should see favorable base from Sep'19 onwards, stabilization of green-field plants, execution of strong order book, limited capex at SMPBV, and the India business benefitting from content increase in BS6. Valuations are at 20.1x/16.4x FY20E/FY21E consol. EPS. Maintain Buy with TP of INR144 (~20x Mar'21 Consol. EPS, a ~20% discount to LPA).
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