Why Analysts Raised Price Targets On Motherson Sumi

Motherson Sumi Systems Ltd. among auto parts suppliers remained the top pick for most analysts, who raised their target prices and earnings estimates for the company citing better margin, improved cash flow and focus on electric vehicles.

A sustained turnaround at global subsidiaries of one of the world’s largest makers of automotive wiring harnesses and mirrors for passenger cars, coupled with reduced debt levels were other catalysts for the upgrade in estimates, according to research reports of brokerages compiled by BloombergQuint.

Net profit of Motherson Sumi — which counts Audi AG, Daimler AG and Volkswagen AG as its top customers — jumped nearly fourfold over the year earlier to Rs 1,268.3 crore in the October-December period. Its revenue, operating income and margin also beat expectations.

“Free cash flow and return on equity improvement should drive rerating [of the stock],” CLSA said in a note. Morgan Stanley sees a global greenfield ramp-up and a recovery in domestic sales to be next key drivers. The analysts also remained bullish on the company.

Shares of Motherson Sumi gained as much as 6.9% to Rs 211 - the highest since September 2018. The stock is up for the fourth straight day. Of the 30 analysts tracking Motherson Sumi, 21 recommend a ‘buy’, eight suggest a ‘hold’ and one has a ‘sell’ rating, according to Bloomberg data. The stock crossed its 12-month Bloomberg consensus price target of Rs 197.7 in today's session.

Here’s what the analysts have to say: