Motherson Sumi Systems

[rmani84]

CMP: 188

Motherson Sumi Systems Limited is into manufacturing of electrical distribution systems and polymer processing. The Company supplies components to the automobile industry. Motherson Sumi, which carries out most of its business through various joint ventures, manufactures molding components, door panels, exterior mirrors, wiring harnesses, and rubber components.

Motherson Sumi is a good bet with strong business model in the Automobile sector. It trades at a P/E of 28 with dividend yields of well over 1% in the last 12 months. It runs at a debt of 867 Crores with 19 Crores cash in hand. Revenues have risen from 1303 Crores to 3587 Crores in the last 5 years. Profits have risen from 128 Crores to 317 Crores in the last 5 years. Profit margins have dipped from 10% to little below 9% over the last 5 years. Buy and hold for long term gains.

[Mr bharathi]

Motherson Sumi Systems Limited (NSE: MOTHERSUMI)

The company’s share price (as on January 22, 2016): Rs. 256.65 per share
Market Capitalization: Rs. 33,960 crores
52 week high –low: 395.85(06/08/2015) – 217.30(05/10/2015)
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Business
Motherson Sumi Systems Limited (MSSL) is a specialised full system solutions provider and caters to a diverse range of customers in the automotive and other industries. MSSL has a strong and growing presence in wiring harnesses, rear view mirrors, cockpits, bumpers, interior trim as well as a broad range of other polymer, elastomer and metal-based parts and systems.

History:
Motherson Sumi Systems Limited (MSSL) is the flagship company of the Samvardhana Motherson Group, established in 1986. It is a joint venture between Samvardhana Motherson Group and Sumitomo Wiring Systems (Japan).

The company has a presence in 25 countries across six continents. The company has completed over 20 years of being listed at the Indian bourses.

Industry:
In FY 2014-15, the Indian auto industry produced 23.37 million vehicles, a growth of 8.68%.

The Indian automotive sector has the potential to generate up to US$ 300 billion in annual revenue by 2026 and contribute over 12% to India’s GDP, as per the Automotive Mission Plan 2016-26 prepared jointly by the Society of Indian Automobile Manufacturers (SIAM) and government.

Market share:
 Market leader with over 65% market share of passenger car wiring harnesses in India.
 Samvardhana Motherson Reflectec has 22% share of global passenger car rear view mirror market and a 53% share in India.
 MSSL is currently the largest auto ancillary in India and also ranked 55th in global auto component suppliers.

Risks:
Volkswagen is a major customer of MSSL. Volkswagen was rocked by the emission scandal in 2015 and in January 2016, Volkswagen announced that its sales declined in 2015 for the first time since 2002.

Notable Points:
 Promoter and promoter group holds 65.61%.
 The company provides yearly dividend to its shareholders.
 MSSL is included in Forbes Fabulous 50 Asian Companies and the Top 100 global challenger.

Daimler’s new order
In April 2015, MSSL received an order worth of Rs. 15,400 crores from Daimler for future Mercedes-Benz vehicle generation. It is excepted to commence from 2018.

To support Daimler’s expansion activity, MSSL decided to invest in 2 new plants, which will be closer to Daimler’s vehicle assembly plant.

Highlights from 2014-2015 Annual report
 Consolidated sales up by 14%, standalone sales up by 10%
 The Company has achieved 26% return on capital employed (ROCE)
 EBITDA increased by 13% on consolidated basis
 Profit After Tax (PAT) improved by 18% on consolidated level

Latest quarter results:
In November 2015, the company announced its Q2 results: The Company’s consolidated net profit for the quarter ended September 30, 2015 increased 117% in comparison to quarter ended September 30, 2014. During the same period, total income increased 14%.

5 year plan by MSSL
MSSL also announced its new 5 - year plan, for which it has set the following key targets for its 2020 results:

Targets 2020 Targets
1. Revenue US $18 billion
2. ROCE 40%
3. Dividend payout ration 40%
4. “3Cx15” (no Component, Customer or Country to represent more than 15% of turnover)


Conclusion: Even though the company may have some glitch in 2016 due to Volkswagen‘s problems, the Company is a good fit for the long run.