Auto ancillary firm Motherson Sumi: thumbs up for future growth, say analysts
Auto ancillary company Motherson Sumi is betting on rising content per vehicle and the value of acquisitions to meet an aggressive 2020 target. The company has been able to bounce back in recent results after its largest customer Volkswagon saw a substantial hit in sales following the emissions scam that dominated headlines at the end of 2016. Motherson Sumi management says that it expects its 2020 revenues from its car consoles to rise to $18 billion from $8 billion currently - more than double - and its RoCE to rise to 40% from 28% now. "We will likely meet the 2020 target a year earlier," the management told analysts of Axis Direct. The bullishness of management on these targets suggests that the share price of the company has room to grow. Three analysts - ICICI Securities, Axis Direct and Chola Wealth - revised targets upwards since March. India is a focus market, with growth expected from the rising number of vehicles on the road, and the company also expects to see higher console content per vehicle driven by new BS6 emission norms. The company is also focusing on expanding its US market footprint, with an upcoming plant in Alabama - which will be Motherson Sumi's largest ever, and from where it will be a supplier to Daimler. The firm's recent acquisition, the Finland-based PKC Group, is in need of upgrades, the firm noted. Most of these are expected to be relatively easy process shifts. The RoCE of PKC is 7% versus MSS' RoCE of close to 50% in standalone. It expects to drive PKC's RoCE up by 20% by incorporating MSS's best practices. See the most recent reports from Axis Direct and Edelweiss.06-07-2017