Buy Motherson Sumi Systems, target price Rs 300: Emkay Global

Emkay Global has buy call on Systems Ltd. with a target price of Rs 300.

The current market price of Motherson Sumi Systems Ltd. is Rs 241.85 Time period given by analyst is one year when Motherson Sumi Systems Ltd. price can reach defined target.

Motherson Sumi Systems Ltd., incorporated in the year 1986, is a Large Cap company (having a market cap of Rs 75979.90 Crore) operating in Auto Ancillaries sector.

Motherson Sumi Systems Ltd. key Products/Revenue Segments include Auto Electricals, Sale of services, Traded Goods, Scrap, Other Operating Revenue, Export Incentives and Job Work for the year ending 31-Mar-2021.

Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 16312.13 Crore, down -4.23 % from last quarter Total Income of Rs 17033.46 Crore and up 90.74 % from last year same quarter Total Income of Rs 8551.95 Crore. Company reported net profit after tax of Rs 426.32 Crore in latest quarter.

Investment Rationale

At its Nov’20 analyst meet, MSS had emphasized Vision 2025 with a target of$36bn revenues vs. FY20 revenues of $9bn. These acquisitions are small steps toward Vision2025 targets. Immediate revenue additions will be small at Rs1.3bn from CIM, which is to be consolidated as a subsidiary. In comparison, Nanchang’s share of profits/losses would be accounted using the equity method. The CIM acquisition gives a head-start into the high entry barrier aerospace business, as it has 60+ qualifications/certifications, and is a step toward achieving the target of reaching $1bn revenue from the aerospace sector in the medium term. China is an important market which contributes 7% of MSS revenues, and Nanchang’s acquisition should strengthen MSS’ presence in the region.

Promoter/FII Holdings
Promoters held 61.7 per cent stake in the company as of June 30, 2020, while FIIs held 17.1 per cent, DIIs 12.8 per cent and public and others 8.4 per cent.