ICICI Direct has given Hold recommendation for Motherson Sumi with a target price of Rs. 185 in its research report issued on Feb 14, 2022

ICICI Direct’s research report on Motherson Sumi

Motherson Sumi (MSS) primarily serves global PV industry with wiring harnesses, vision systems (mirrors) & plastic body parts as key product lines. History of successful turnarounds in acquisitions and inorganic-led growth SMRPBV order book was at €15.3 billion as of H1FY22

Outlook

We maintain HOLD rating on the stock amid slower-than-anticipated recovery in PV auto volumes globally amid persisting chip shortage We value the combined entity post-merger of erstwhile SAMIL into MSSL at Rs 255/share on SOTP basis. Consequently, our target for individual entities i.e. DWH and new SAMIL (ex-DWH) is at Rs 70/share and Rs 185/share, respectively. Given the high RoCE profile (~40%) and exposure to pure play domestic PV wiring harness segment at DWH, we assign a premium valuation to it at 40x PE on FY23E vs. new SAMIL being valued at ~26x PE on FY23E.

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