Buy Motherson Sumi Systems, price target Rs 110: IIFL

IIFL has a buy rating on Motherson Sumi Systems in the long term with a target price of Rs 110. The stock ended up 3.9 per cent at Rs 64 on Thursday while the BSE Sensex closed 581.28 points dow (-2.01 per cent) at 28,288.23.

Investment Rationale

Motherson’s management, in an investor call, acknowledged disruption to production due to shutdowns in various parts of the world, said IIFL. The brokerage has cut consolidated revenue assumptions by around 10 per cent which has led to 20-30 per cent cut in its FY21 and FY22 EPS estimates. The current stock price implies that the market is assigning very little value to overseas subsidiaries, said IIFL.

Financials

Motherson Sumi Systems's key products/revenue segments include aute Electricals which contributed Rs 7293.40 crore to sales value (96.20 per cent of total sales); Sale of services which contributed Rs 114.80 crore to sales value (1.51 per cent of total sales); Traded Goods which contributed Rs 102.50 crore to sales value (1.35 per cent of total sales); Scrap which contributed Rs 33.40 crore to sales value (0.44 per cent of total sales); Export incentives which contributed Rs 19.40 crore to sales value (0.25 per cent of total sales), Other operating revenue which contributed Rs 16.50 crore to sales value (0.21 per cent of total sales) and Job Work which contributed Rs 1.30 crore to sales value (0.01 per cent of total sales)for the year ending 31-Mar-2019.

For the quarter ended 31-12-2019, the company has reported consolidated sales of Rs 15436.46 crore, down -1.73 per cent from last quarter sales of Rs 15708.99 crore and down -4.91 per cent from last year same quarter sales of Rs 16233.65 crore. The company has reported net profit after tax of Rs 318.51 crore in the latest quarter.