Motilal Oswal is bullish on Motherson Sumi recommended buy rating on the stock with a target price of Rs 122 in its research report dated July 03, 2020.
Motilal Oswal 's research report on Motherson Sumi
In the follow-up to its Jan’20 proposal to demerge the Domestic Wiring Harness business and acquire 49% stake in SMRPBV, the board today approved the merger of SAMIL (holdco) with its unlisted businesses. At the proposed share-swap and benchmark valuation, the implied value of the other businesses of SAMIL is ~INR60b for FY19/FY20 derived PAT of the core business at ~INR1.8b/INR0.9b. This solution simplifies the structure well and aligns the interest of all the stakeholders. However, considering the limited understanding (as details are limited) of the core businesses of SAMIL, implied valuations seem to fully capture the medium-term growth potential of its key businesses. We believe this would drive a better value discovery of the Non-India Wiring Harness business, also giving the minority shareholder the option to invest in either or both of the businesses.
Outlook
Implied valuations for SAMIL’s core business appear to fully capture medium-term potential. However, this arrangement does align the interest of the minority with that of the promoters and creates a platform for the next leg of growth for the group. We maintain Buy with TP of ~INR122.
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