Motherson Sumi: Should you buy, sell or hold post-Q4 show?
Motherson Sumi stock: It is well-placed to capitalise on the recovery in auto demand from FY2022E onwards, according to Kotak Institutional Equities
Shares of Motherson Sumi tanked almost 7% to Rs 250 despite the company reporting strong March quarter results. The fall is primarily due to mixed view from the brokerages.
Net profit of the auto ancillary firm almost quadrupled to Rs 713.62 crore in the quarter ended March 2021 as against Rs 183.38 crore during the previous quarter ended March 2020. Sales rose 17.89% to Rs 16,836.09 crore in the quarter ended March 2021 as against Rs 14,281.56 crore during the previous quarter ended March 2020.
Motherson Sumi said consolidated revenues in Q4FY21 were more than pre-COVID levels as industrial activity picked up globally. This was despite multiple headwinds such as chip shortage, higher commodity costs etc. the company sustained profitability.
On annual basis, its net profit declined 11.19% to Rs 1,039.13 crore in the year ended March 2021 as against Rs 1,170.04 crore during the previous year ended March 2020. Sales declined 5.52% to Rs 5,6951.31 crore in the year ended March 2021 as against Rs 6,0278.35 crore during the previous year ended March 2020.
Here’s what brokerages have to say:
Motilal Oswal | Target price: Rs 300
Motherson Sumi would continue to benefit from a cyclical recovery in its key businesses as well as from a strong order book and improving efficiencies in Samvardhana Motherson Automotive Systems Group BV. It has upgraded its FY22E/FY23E EPS (earnings per share) by 16%/20%, factoring in a strong recovery in Samvardhana Motherson Peguform, India, and PKC, as well as a lower tax rate.
Kotak Institutional Equities | Target price: Rs 260
Motherson Sumi is well-placed to capitalise on the recovery in auto demand from FY2022E onwards. It is well-poised to benefit from the increase in electronics content per vehicle in passenger vehicles and the shift towards electric vehicles globally, given strong order wins.
Antique | Target price: Rs 240
In the near term, Motherson Sumi revenue and EBITDA growth will be led by a cyclical recovery in global auto demand and continued improvement in operating performance at SMP’s greenfield plants. We expect MSS’ revenue CAGR of 10% and EBITDA CAGR of 23% over FY21-24E. Production shutdowns (India) and semiconductor shortages globally are likely to be headwinds for OEM production in the near term. MSS stock has moved up 38% in the last two months compared to 7% for the benchmark, Nifty. The strong outlook is fully priced in the stock price.
(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing)