Motherson Sumi zooms over 7% to fresh 52-week high; CLSA raises target to Rs 250

Shares of Motherson Sumi Systems (MSSL) rallied another 7 percent to hit a fresh 52-week high of Rs 212.00 apiece on Monday as investors cheered the auto ancillary company’s stellar December quarter earnings. Motherson Sumi's stock price had gained over 10 percent on Friday.

The auto components major reported a nearly four-fold jump in consolidated net profit from continuing and discontinued operations at Rs 1,268.31 crore in the third quarter ended December 31, 2020. The company had posted a consolidated net profit from such operations of Rs 340.32 crore in the same period last fiscal.

Consolidated revenue from operations during the quarter jumped almost 14 percent to Rs 17,092.44 crore from Rs 15,000.10 crore in the same period last fiscal.

On the operational front, consolidated Ebitda rose 60.7 percent to Rs 1,795.5 crore from Rs 1,117.1 crore, while EBITDA margin expanded by 310 bps to 10.5 percent from 7.4 percent, YoY.

The company’s earnings beat analysts’s estimates on all fronts. It reported the lowest net debt compared to previous 14 quarters.

MSSL said its board had on July 2, 2020, approved a group reorganisation plan that entails demerger of domestic wiring harness (DWH) business from MSSL into a new company Motherson Sumi Wiring India Ltd (MSWIL) and subsequent merger of SAMIL into MSSL to consolidate 100 percent shareholding in Samvardhana Motherson Automotive Systems Group BV (SMRP BV) as well as to bring all auto component and allied businesses in Samvardhana Motherson International Ltd (SAMIL) under MSSL.

Global brokerage CLSA said that Motherson Sumi’s Q3FY21 results were significantly better than expectations.

“Consolidated Ebitda was 47 percent higher than our forecast due to better-than-expected profitability in all its global subsidiaries. The sustained turnaround at SMP (50 percent of group revenue) was the biggest positive as it was the source of earnings disappointment and lower ROEs during FY19-FY20,” CLSA said.

The brokerage firm increased its FY22-23 EPS 21 percent-29 percent to factor-in better margins. It upgraded the stock to buy from outperform and raised the target price to Rs 250 per share from Rs 175 earlier.

The stock price of Motherson Sumi Systems has rallied over 60 percent in last three months and is up more than 26 percent YTD.

At 10:00 am, the shares of Motherson Sumi Systems were trading 6.03 percent higher at Rs 209.15 apiece on the BSE as compared to a 0.97 percent gain on the benchmark Sensex.