Motherson Sumi Shares Fall 7% as Global Firms Cut Targets

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
  • Home
  • Views On News
  • Jun 3, 2021 - Motherson Sumi Shares Fall 7% as Global Firms Cut Targets

Motherson Sumi Shares Fall 7% as Global Firms Cut Targets

Jun 3, 2021

A day after reporting its quarterly numbers, Motherson Sumi share price tumbled over 7% following downgrades from three global research firms.

Yesterday, shares of the Noida-based company scaled record highs, rising as much as 15% after it reported good earnings.

March quarter results

The auto component parts maker reported a 289% year on year (YoY) rise in its consolidated net profit to Rs 7.1 bn for the March quarter.

This was sharply higher than analysts' estimates.

Consolidated revenues of India's largest auto ancillary - which counts Audi AG, Daimler AG, and Volkswagen AG as its top customers, jumped 17.6% YoY to Rs 169.7 bn. This was also slightly higher than estimates.

Motherson Sumi's board also approved a final dividend of Rs 1.5 per share for the financial year ended March 2021.

Remote working beneficial for the company

The company's Chairman, Vivek Chaand Sehgal, in an interview said that work from home, working from the plant, and not travelling too much, has given team time to bring in cost efficiencies into real action.

--- Advertisement ---
You Need to See This Today

Would you like to know about 3 stocks having the potential to return as much as 1,000% or more over the long term?

If yes, then check out this page right away.

There's only a small window of opportunity to get in before it's too late. If you miss it, then it could be the greatest financial mistake of your life.

Just click here to get full details immediately.
------------------------------

The earnings recovery has been led by a strong traction seen in domestic as well as international markets.

However, uncertainties surrounding the Covid impact still prevail. This is evident as major auto companies posted a fall in their May 2021 sales.

You can check out the latest sales numbers here: Auto Sales Dampened in the Month of May. Will it Bounce Back?

Motherson Sumi said that going ahead, production shutdowns in India and semiconductor shortages globally, will be the reasons impacting OEM production in the near term.

The debt profile

Motherson Sumi pared its gross debt to Rs 107.6 bn from Rs 117.9 bn as of March 2020.

The company's net debt fell to Rs 48.2 bn from Rs 69.2 bn as of March 2020.

This has led to its lowest ever debt to EBIDTA ratio, the company said in a statement.

The management said they wish to reduce the debt on their books even more, to achieve their target of 40% ROCE in the next five years.

Commenting on demand, the management said they are witnessing a good recovery in global business.

The focus on electric vehicles (EVs) continues with 25% of new order book coming from pure EV.

On the ongoing raw material price surge, the company said it is hopeful on commodity price rise to stable out.

--- Advertisement ---
BEST VALUE: Do THIS to Grow Potentially 40-60% Richer in Just 1 Year...

What do you get when you tap into an enormous market proven to be a treasury of wealth-boosting opportunities...

... pick two money-making stocks ready to prosper and pump out spectacular gains for people who act now...

... and take complete advantage of an irreversible mega-trend that'll do nothing but skyrocket this segment and the stocks inside it?

TRULY ENORMOUS PROFIT POTENTIAL: 40-60% Gains in Just 1 Year!
------------------------------

Why the stock fell despite stellar numbers

Motherson Sumi shares fell today after several global research firms downgraded its stock.

Jefferies, CLSA, and Nomura lowered their targets for the auto ancillary company, highlighting its expensive valuation due to the rally.

While solid results prompted the shares to rally the most in more than a year yesterday, the rating downgrades caused the stock to drop as much as 7%, the biggest fall since 19 April.

However, the downgrades are not the only reason why the stock corrected today.

Today's fall can be attributed to profit booking, given that the stock has surged 85% since the January lows.

Motherson Sumi share price ended the day down by 6.9% today.

At the price of Rs 251, the company commands a marketcap of Rs 791 bn.

Equitymaster's View on the Automobiles Sector

We reached out to Brijesh Bhatia, Research Analyst at Equitymaster, and Editor of the premium monthly recommendation service Fast Profits Report, for his view on the automobile sector.

Here's what he has to say...

  • Auto Index is trading at 13-weeks high of 10,600 levels after breaking out of bullish head and shoulder pattern.

    After testing the high of 11,093 in February 2021, index retraced by 27.6% of the move from March 2020 low of 4,452 to 11,093 high at 9,345 and resumed it bullish journey.

    The medium to long term trend for auto sector looks bullish but stock selection would be the key for investors.

    I believe the lockdown pain is temporary impact but the company which has proven record of coming back strongly from bad times should be on investors watchlist.

Financial Writer at Equitymaster, Aditya Vora also wrote about the automobile sector in a recent editorial.

REVEALED: 3 "Super Smallcaps" You Didn't Know About

Here's an excerpt:

  • After four years of underperformance, I expect the auto cycle to change for the better.

    Also, valuations of auto stocks are fairly reasonable compared to certain pockets of market euphoria.

    When market leaders are available at 30-35% discount from their all time highs, it certainly merits a look.

    I do agree, the sector is down and is likely to stay that way for a few quarters mainly due to the softness in demand.

    But it's during such tough times, the best companies can be found with reasonable valuations.

Aditya believes along with auto stocks, a bigger opportunity for investors would be in the auto ancillary space.

You can read his entire editorial here: Time to Press the Accelerator on Auto Stocks?

About Motherson Sumi Systems

Motherson Sumi is one of the world's leading specialised automotive component manufacturing companies for Original Equipment Manufacturers (OEMs). It's the largest auto ancillary firm in India.

The flagship company of the Samvardhana Motherson group was incorporated as a JV between Samvardhana Motherson International (SMIL) and SWS in 1986.

The company has over 165 subsidiaries with over 230 facilities across Asia, Europe, North America, South America, the Middle-East, Australia, and Africa.

For more details about the company, you can have a look at Motherson Sumi company factsheet and Motherson Sumi quarterly results on our website.

For a sector overview, read our auto ancillaries sector report.

You can also compare Motherson Sumi with its peers.

Motherson Sumi vs Suprajit Engineering

Motherson Sumi vs Amara Raja Batteries

Motherson Sumi vs Exide Industries

Motherson Sumi vs Swaraj Engines

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Equitymaster requests your view! Post a comment on "Motherson Sumi Shares Fall 7% as Global Firms Cut Targets". Click here!

  

More Views on News

MOTHERSON SUMI 2020-21 Annual Report Analysis (Annual Result Update)

Sep 6, 2021 | Updated on Sep 6, 2021

Here's an analysis of the annual report of MOTHERSON SUMI for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of MOTHERSON SUMI. Also includes updates on the valuation of MOTHERSON SUMI.

MOTHERSON SUMI Announces Quarterly Results (1QFY22); Net Profit Up 131.0% (Quarterly Result Update)

Aug 12, 2021 | Updated on Aug 12, 2021

For the quarter ended June 2021, MOTHERSON SUMI has posted a net profit of Rs 3 bn (up 131.0% YoY). Sales on the other hand came in at Rs 162 bn (up 93.5% YoY). Read on for a complete analysis of MOTHERSON SUMI's quarterly results.

Amara Raja Batteries Dips 1% Even as Net Profit Doubles (Views On News)

Aug 16, 2021

The company's net profit doubled to Rs 1.2 bn on strong aftermarket demand across product segments.

MRF's Multifold Jump in Bottomline Doesn't Excite Investors (Views On News)

Aug 10, 2021

Here's a rundown on MRF's June quarter results.

Auto Components Maker Rolex Rings to Hit the Market on 28 July. Price Band Fixed at Rs 880-900 (Views On News)

Jul 26, 2021

Rolex Rings grey market premium is at around Rs 530 from its issue price of Rs 880-900.

More Views on News

Most Popular

What is EBITDA & EPS?

Here's a breakdown of what EBITDA margin means and why it is important as a valuation metric for investors.

Sansera Engineering IPO: Key Points to Consider (Views On News)

Sep 8, 2021

This IPO is a pure OFS and the company is looking to raise Rs 12.8 bn at the upper price band of Rs 744.

5 Stocks that Turned Rs 1 Lakh into Rs 1 Crore (Views On News)

Sep 7, 2021

Patience is one of the biggest virtues you need to have if you want to become a crorepati in the stock market.

5 Indian Companies that are Leading the AI Race (Views On News)

Sep 9, 2021

During the pandemic, India reported the highest increase in the use of AI at 45% compared to other major economies. AI has potential to add US$90 bn to the Indian economy by 2025.

The Top Stocks to Sell in this Bull Market (Profit Hunter)

Sep 8, 2021

When I saw the list of so-called 'value stocks' published by a leading brokerage, my worst fears came true.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2021
Get our special report Multibagger Stocks Guide (2021 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MOTHERSON SUMI SHARE PRICE


Sep 20, 2021 01:54 PM

TRACK MOTHERSON SUMI

  • Track your investment in MOTHERSON SUMI with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON MOTHERSON SUMI

MOTHERSON SUMI - MAH. SCOOTERS COMPARISON

COMPARE MOTHERSON SUMI WITH

MARKET STATS