Buy Munjal Showa; target of Rs 130: ICICI Direct

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ICICI Direct's research report on Munjal Showa

Munjal Showa (MSL) is a leading shock absorber (including front forks, struts) manufacturer domestically with a significant market share in the oligopolistic industry. It can be seen as a proxy play on volume & demand recovery at Hero MotoCorp (HMCL), with HMCL accounting for ~80% of its total sales (FY20). Part of the Hero Group (Munjal family), MSL was established in 1985 in technical collaboration with Showa Corporation (Japan), which also holds a 26% stake in the company.

Outlook

We expect base case valuations to prevail at MSL and assign BUY rating, valuing the stock at Rs 130 i.e. 4x EV/EBITDA with implied P/B at 0.8x FY20 numbers.

For all recommendations report, click here

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