Motherson Sumi Systems share price falls 8.3% in intraday trade, halts 9-day gaining spree; should you buy?

Motherson Sumi Systems share price tanked over 8 per cent to Rs 110.90 apiece on BSE in intraday deals even as most of the research and brokerage firms have a ‘buy’ rating with a potential upside of up to 27 per cent to the stock. With today’s fall, the stock has paused its nine-day streak. Last week, Motherson Sumi hosted Investors’ Day for Samvardhana Motherson International’s (SAMIL) businesses, which is set to be merged with the listed entity as part of a restructuring scheme. According to Motilal Oswal Financial Services, SAMIL’s revenues are well dispersed across businesses with its largest business having revenues of Rs 870 crore. 

Also, there are few businesses like lighting, stamping, suspensions, etc., which are huge segments globally. The firm sees a 27.14 per cent upside in the stock price from today’s low with a target price of Rs 141 apiece. It believes this reorganisation does align the interest of the minority shareholder with that of the promoters and creates a platform for the next leg of growth for the group.

Prabhudas Lilladher in its latest research report noted that while current contribution is small, business such as lighting (among top 3 suppliers in exterior Auto lightings), Suspension (large aftermarket opportunity) and shift from cold stamp to hot stamp (for light-weighting) will be a meaningful contributor in coming years for Motherson Sumi Systems. The brokerage firm maintained ‘buy’ rating and revised its target price to Rs 139 from Rs 125 as it values MSS at 20x (vs 18x) to factor in better than expected recovery in global auto volumes and tight control on debt.

Analysts at Emkay Global Financial Services said that the ongoing restructuring exercise will create a separate entity for the domestic wiring harness business, and a merger of parent entity SAMIL into MSS to bring in the remaining 49% SMRPBV stake and other autos/non-auto businesses by July 2021. SMRPBV is a joint venture between Motherson Sumi Systems Ltd, and Samvardhana Motherson International Ltd (SAMIL), the principal holding company of Motherson Group. Emkay pegged 12-month target price of Rs 133, implying an upside of 20 per cent with a ‘buy’ rating to it. “The revised organization structure is a step toward the company’s Vision 2025 − revenue target of $3600 crore with ROCE of 40 per cent,” it said.

Brokerage firm JM Financial believes SAMIL will provide a play on ‘Atmanirbhar Bharat’. Auto component segments like engine electricals, cabin and load body, cabin electricals, HVAC etc., are some of the high opportunity import substitution areas and SAMIL through its various businesses like MMLI (lighting solution), MSGI (body parts), MTTL (high-performance tools), VMTI (bus HVAC), CMT (tooling equipment for body parts), FMCEL (cabin solutions) etc. has exposure to these key component segments and is likely to be a key beneficiary from import substitution under ‘Atmanirbhar Bharat’. 

Motherson Sumi Systems share price closed 5.82 per cent lower at Rs 114 apiece, as compared to a 0.21 per cent gain in the S&P BSE Sensex

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