Saturday, October 1, 2022

Motherson Sumi share price triples in 8 months, up 5% today on Vision 2025; should you buy?


Motherson Sumi Systems, Motherson Sumi Systems sharesAs part of Vision 2025, Motherson Sumi Systems will be expanding into new divisions like medical, aerospace, logistics and IT.

Motherson Sumi Systems share price surged nearly 5 per cent to Rs 146.30 apiece on BSE after the company shared its Vision 2025, with ambitious revenue and returns targets. The stock has been on a gaining spree and added over 12.5 per cent in six trading sessions. At the analyst meet, Vision 2025 was emphasized with a target of $36bn revenue in 2024-25 with 40 per cent ROCE, and additional focus on diversifying into new industries, with 75 per cent of revenues from the automotive industry and 25 per cent from new divisions. As part of Vision 2025, Motherson Sumi Systems will be expanding into new divisions like medical, aerospace, logistics and IT. Research brokerage firms are upbeat on the stock post analyst meet, and see up to 15 per cent rally in the stock price. 

From March low of Rs 48.50, Motherson Sumi Systems share price has zoomed 202 per cent. Motilal Oswal Financial Services said Vision 2025, along with the ongoing restructuring of the group, will help the company shape up for the next phase of growth. The brokerage firm believes that Motherson Sumi Systems is the best proxy to a global automotive recovery, which is supplemented by company-specific drivers of earnings. It has recommended to buy the stock at a target price of Rs 160, implying an upside of 15 per cent. 

Analysts at JM Financial said that in the next 5 years, MSSL is likely to grow ahead of the automotive industry and achieve its USD 27bn target, supported by QCDDMSES approach, which aids higher business wins (quality, cost, design & development, delivery, management, safety, environment and sustainability), inorganic growth and, availability of funds for organic/inorganic growth – internal accruals (capex cycle is largely over) and comfortable credit profile. The brokerage firm has given a target price of Rs 150, an upside of 7.5 per cent.

Emkay Global Financial Services is also positive on Motherson Sumi Systems on the back of its strong management capabilities and expectations of a gradual pick-up in underlying segments. It believes that the ongoing restructuring exercise should result in a reduction in Sumitomo’s stake and allow MSS to pursue acquisition opportunities more aggressively. While the key downside risks include demand contraction in target markets, the weak performance of large clients, and adverse currency rates, among others.

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