For A Robust 28% Short Term Return, Buy This Midcap Wiring Stock: Motilal Oswal

Brokerage firm Motilal Oswal recommends investors buying the stocks of Motherson Sumi Wiring India, which has the potential to grow by 28% in the upcoming one year.

Target Price, Current Market Price, and Company Performance

The Current Market Price (CMP) of Motherson Sumi Wiring India (MSUMI) is Rs. 62. Motilal Oswal has estimated a Target Price for the stock at Rs. 80. The stock has potential to give a 28% return, in the upcoming 1 year. This is a mid-cap company with a market capitalization of around Rs. 19,705 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 62
Target Price	Rs. 80
Potential 1 year return	28.00%
52 week high share price	Rs. 76.00
52 week low share price	Rs. 56.00

The company's sales in FY22 was recorded at Rs. 56.3 b, which is expected to be at Rs. 67.6 b in FY23. Their EBITDA in FY22 stood at Rs. 7.3 b, which is expected to be at Rs. 9.3 b in FY23. The company's adj. PAT in FY22 was recorded at Rs. 4.6 b, which is expected to be at Rs. 5.8 b in FY23.

Motilal Oswal comments: stock advantages and risks

Commenting on the stock's potential, Motilal Oswal said, "We estimate Motherson Sumi's revenue/EBITDA/PAT to report 15%/22%/23% CAGR over FY22-25E. Strong operating performance coupled with limited capex has driven strong FCFF and Motherson Sumi has turned into a net cash company in FY22. Consequently, RoIC would improve to 62% by FY25E from 53% in FY22, though RoE would decline to 41% from 51% over the same period, due to cash drag. The stock trades at 34.1x/26.7x FY23E/24E EPS. We believe Motherson Sumi deserves rich valuations due to its strong competitive positioning, top-decile capital efficiency, and position as a prime beneficiary of EVs and other megatrends in Autos. Our target P/E of 35x is in line with the other auto component companies, which enjoy similar competitive positioning, growth potential and superior capital efficiency."

However, key risks remain as, customer/segment concentration, and electrification, which influence the competitive landscape.

Company profile

Motherson Sumi Wiring India (MSUMI), a JV between Sumitomo Wiring System (SWS) and Motherson Group, is a market leader in the Indian wiring harness industry with a market share of over 40%. After the restructuring of Motherson Sumi Systems (MSS), Motherson Sumi transformed into an India-based pure play wiring harness player with a focus on the domestic market. It derives over 95% of its revenue from the domestic business with negligible exposure to exports. Hence, Motherson Sumi is a direct beneficiary of the Indian automotive industry recovery, with a high exposure to the domestic PV segment.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.