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Stock To Buy: This 2022 Listed Midcap Stock Grew 37.4% Since Listing, Buy For Further 24% Upside

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Leading brokerage firm ICICI Direct retains its "buy" call on Motherson Sumi Wiring India (MSWIL) with a positive outlook. The brokerage claims a potential upside of 24% with an estimated a target price of Rs 75 apiece. It is a mid-cap auto ancillaries sector company having a market cap of Rs 26,880.34 crore.

 

MSWIL was established in 1986 as a JV with Sumitomo Wiring Systems (Japan). MSWIL is a leading, full-system wiring harness solutions provider in India catering to all major OEMs like Maruti Suzuki, Toyota Motors, Ashok Leyland, Tata Motors, etc. Listed on March 28, 2022. According to the brokerage, the FY22 segment mix are as follows: PV: 60%; CV: 11%; 2-W: 12%; Others: 17%.

Stock Outlook & Returns Since Listing

Stock Outlook & Returns Since Listing

The stock of MSWIL last traded at Rs 60.72 apiece on NSE, 1% up as compared to its previous close. The stock is currently trading near its 52-week high. It recorded its 52 week high level on 16 November 2022 at Rs 71.15 and 52 week low level on 30 March 2022 at Rs 40, respectively.

Since its listing date i.e. 28 March 2022, the stock jumped 37.4%. In a week, it grew 1.76%. It grew 5.09% in 1 month and 2.18% in 3 months, respectively.

 

 

Group Analyst Meet key takeaways
 

Group Analyst Meet key takeaways

The group reiterated its commitment towards US$36 billion revenue target by FY25 with 40% RoCE & 40% dividend payout. It also aims to realise 75% of revenues from the auto space and rest 25% from non-auto domain. The aim is also to have no component, country and customer >10% of sales. It counts domestic wiring business (MSWIL) as an integral part of this vision.

Key takeaway for domestic wiring harness business include: (i) 1.5x wiring harness content in an SUV vs. a hatchback car (ii) 1.2x wiring harness content in a top variant of PV model vs. the base variant (iii) 1.1x wiring harness content in a top variant 2-W vs. base variant (iv) 2.4x wiring harness content in an electric PV vs. ICE driven PV and (v) 8x wiring harness content in an electric 2-W vs. ICE powered 2-W.

ICICI Direct Retains Buy With Rs 75 target price

ICICI Direct Retains Buy With Rs 75 target price

MSWIL's share price has grown ~30% (from bonus adjusted ~Rs 46 in April 2022) vastly outperforming Nifty Auto index in that time.  With fundamentals remaining unchanged, we retain our BUY rating on the stock. MSWIL is a good proxy to play upon the recovery in the domestic automobile space with superlative return ratio profile (RoCE ~40-50%) and structural levers for long term growth given the content/vehicle increase due to rise in electronic content in vehicles as well as electrification. "Rolling over our valuations, we now value MSWIL at Rs 75 i.e. 40x P/E on FY25E EPS," the brokerage said.

Key triggers for future price performance

Key triggers for future price performance

ICICI Direct said, "We build 17.2% net sales CAGR in FY22-25E riding on OEM ramp up, focus on premiumisation (i.e. greater share of technological advanced features like ADAS, Sensors, etc) and greater share of UVs in pass car segment." 
FY22: Net cash positive b/s: Rs 280 crore, healthy CFO/FCF generation.

 

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.

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