Motherson Sumi Jumps Over 6% After It Outlines 5-Year Plan

On Monday, shares of Motherson Sumi Systems (MSSL) rose over 6 percent to Rs 148.30, which is close to its 52-week high of Rs 151, after the company announced its next five-year plan, Vision 2025.

At the analyst meeting held recently, the auto ancillary company said that it is targeting $36 billion in group revenues by FY25E, including 25 percent contribution from non-automotive space. It also said that it aims to be highly capital efficient with a targeted group RoCE of 40 percent.

Other goals included 40 percent consolidated dividend payout ratio and continued business de-risking via 3CX10 i.e. no component, country or customer to form more than 10 percent of revenues.

"The ongoing restructuring exercise should result in a reduction in Sumitomo's stake and allow MSSL to pursue acquisition opportunities more aggressively. Acquisitions are expected to be funded by free cash flows and debt/equity infusion. Net debt/EBITDA upper limit has been set at 2.5x vs. FY20 level of 1.3x," said analysts at Emkay Global Financial Services in its report.

The business situation continues to improve with growth in underlying segments and a healthy order-book. Utilization levels have increased to 75 percent in 80 percent of global plants. The increase in content per vehicle continues owing to higher electronic content/electrification, light-weighting and premiumization, it added.

"Our positive view on MSSL is underpinned by its strong management capabilities and expectations of a gradual pick-up in underlying segments," the brokerage firm said.