Update on the Indian Equity Market:
On Tuesday , NIFTY ended higher at 17,991 (+0.26%). All the sectoral indices were gainers, led by PSU Banks (+3.1%), Media (+1.5%), and FMCG (+1.2%). IT was the lone loser, down by (-0.9%). Among the stocks, Titan (+6.1%), Bajaj Auto (+3.3%), and Bajaj Finserv (+3.0%) led the gainers while HCL Tech (-3.7%), HDFC Life (-1.9%), and Coal India (-1.7%) led the losers.
Excerpts of an interview with Mr. Vivek Chaand Sehgal, Chairman , of Motherson Sumi (MS) with ET NOW on 11th October 2021:
- Acquisition of CIM Tools in aerospace segment will be beneficial for MS. CIM Tools have an order book of more than $200 million and the company will do very well in coming time.
- Exports will be the focus area because MS set up bases in the different countries with CIM Tools and there will be a rise in exports because of the customers are abroad.
- CIM Tools is a profit-making company and idea would be to improve it and add to the top line. MS has a clear thinking. They get 40% return on capital employed.
- MS is acquiring existing profit-making joint venture in China. It is very important because MS is more into in passenger vehicles and this one is all about commercial vehicles .
- MS has a huge presence in China and company have a huge market that they can then generate in China itself.
- Opportunity wise in two to three years company will be all over in China. Company is learning about commercial vehicles. It is a wonderful area to get into it because MS is very strong with commercial vehicles globally.
- Comparing global and domestic business is very difficult. The kinds of cars that are produced outside and the cars in India are very different in terms of value. Every car that produced there has a buyer for it. That means customers are at very good situation. Companies have the orders but they have some supply constraints.
- The chip shortage and all other things combated with customers in a very strong way. The demand is huge and the situation is also getting better.
Asset Multiplier Comments
- Auto production cuts and raw material price increase due to inflation might affect company’s performance in the near term.
- Company is expanding its business in different segments. This will be the growth driver.
Consensus Estimate: (Source: market screener website)
- The closing price of Motherson Sumi Systems Limited was ₹ 245/- as of 12-Oct-2021. It traded at 35x/23x/20x the consensus earnings per share estimate of ₹6.89/10.8/12.4 for FY22E/FY23E/FY24E respectively.
- The consensus target price of ₹ 254/- implies a PE multiple of 20x on FY24E EPS of ₹12.4/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”