22 November 2020
Update | Sector: Automobiles
Motherson Sumi
BSE SENSEX
43,882
S&P CNX
12,859
CMP: INR140
TP: INR160 (+15%)
Buy
Vision 2025: Shaping up for the next phase of growth…
…led by new tech, markets and segments, industries and M&A
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
MSS IN
3,158
440.7 / 5.8
151 / 49
20/28/-2
1784
38.3
Financials Snapshot (INR b)
2020 2021E
Y/E March
Sales
635.4 592.7
EBITDA
52.0
45.7
Adj. PAT
11.7
5.5
EPS (INR)
3.7
1.7
EPS Gr. (%)
-27.5
-53.3
BV/Sh. (INR)
35.7
37.0
Ratios
Net D:E
0.5
0.5
RoE (%)
10.5
4.8
RoCE (%)
6.4
4.7
Payout (%)
47.2
31.5
Valuations
P/E (x)
37.7
80.7
P/BV (x)
3.9
3.8
Div. Yield (%)
1.1
0.4
FCF Yield (%)
7.2
0.9
Shareholding pattern (%)
As On
Sep-20 Jun-20
Promoter
61.7
61.7
DII
13.6
13.4
FII
16.0
15.6
Others
8.7
9.3
FII Includes depository receipts
Stock Performance (1-year)
Motherson Sumi
Sensex - Rebased
2022E
702.3
74.3
18.7
5.9
242.2
41.0
0.2
15.2
11.5
31.5
Motherson Sumi (MSS) has embarked on its next five-year plan - 'Vision 2025' -
with an ambitious (USD36b/40%) revenue/RoCE target, and additional focus on
diversifying into new industries (25% contribution by FY25). [Click here for
presentations of
Day 1
and
Day 2].
Vision 2025 focuses on expanding into nascent geographies, new technologies in
current products and addressing the broader mobility space (beyond PVs).
While organic growth would be broadly driven by content increase through new
technologies and expansion into new markets and segments, inorganic growth
would play an important part in attaining its strategic objectives in the Auto
business and ramp-up in new industries (Aerospace and Health/Medical
Technologies).
Funds for growth would come from: a) internal accruals as a large part of capex is
behind it, b) debt (not exceeding 2.5x net debt-to-EBITDA), and c) equity issue (if
required).
Operational turnaround at its greenfield plants (USA + Hungary) is sustainable. Plants
are operating near full capacity. Hungary has seen a sharp improvement in margin,
which is near high single-digits. SMP's (ex-greenfield) margin stands at 10%.
Vision 2025, along with ongoing restructuring of the group, will help the company
shape up for the next phase of growth. We believe MSS is the best proxy to a
global automotive recovery, which is supplemented by company-specific drivers
of earnings. Maintain Buy.
23.6
Vision 2025: Adding new engines for future growth keeping an eye on
3.4
RoCE
1.1
Vision 2025 has four pillars viz: a) USD36b revenue (v/s USD10b in FY20)
7.9
Sep-19
61.7
13.5
15.0
9.8
210
130
50
with 40% RoCE driven by organic and inorganic initiatives, b) 3CX10 (no
customer/component/country more than 10% of revenue) as it attained
3CX15 in its last five-year plan, c) 75% of revenue from Autos and 25% from
new divisions, and d) Dividend payout of 40% of consolidated PAT.
Auto business/new industries would contribute USD27b/USD9b to the
revenue target. New industries in focus are: a) Aerospace, b)
Health/Medical Technologies, c) Logistic Services and d) Information
Technology (expand from a captive supplier to external customers). In the
last five years, it has done a lot of ground work and seeded these
businesses.
Inorganic initiatives would play a large part (didn't quantify) in Vision 2025.
Funds for growth would come from: a) internal accruals as a large part of
capex is behind, b) Debt (not exceeding 2.5x net debt-to-EBITDA), and c)
Equity issue (if required).
Vision 2025 targets increase in content to up to 5-6% of a vehicle’s value
from the current max of 3-3.5%.
Jinesh Gandhi - Research analyst
(Jinesh@MotilalOswal.com)
Vipul Agrawal - Research analyst
(Vipul.Agrawal@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.