Motherson Sumi falls 3% as brokerages cut target price on weak Q2 show

Japanese investment firm Nomura slashed its target price for Motherson Sumi to Rs 197 from Rs 249 earlier, though it has maintained buy call on the stock.

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Motherson Sumi Systems shares fell 3 percent in morning on Thursday as brokerage houses slashed target price for the stock after a weak set of earnings for September quarter.

Citi has maintained sell call on the auto ancillary company and reduced target price to Rs 135 from Rs 173 per share as earnings trajectory remained weak.

Current consolidated return on capital employed is in high teens, but management’s 40 percent target appears difficult, the research house said, adding value accretive inorganic initiatives & better margin at SMRPBV (Samvardhana Motherson Automotive System Group BV) are upside risks to the stock.

SMRPBV’s profit after tax for the quarter ended September 2018 fell 22 percent to euro 17 million and profit before tax dropped 21 percent to euro 52 million compared to year-ago period.

Samvardhana Motherson Peguform’s revenue increased 4 percent to euro 840 million, but EBITDA (earnings before interest, tax, depreciation and amortisation) fell 12.5 percent YoY.

Deutsche Bank also said Motherson’s Q2 profitability continued to lag expectations. Hence, it retained hold rating on the stock and cut target price to Rs 170 from Rs 176 per share.

The research house expects FY18-21 EBITDA & EPS CAGR of 15 percent & 19 percent, respectively. The single biggest potential catalyst would be new acquisitions, it said.

Japanese investment firm Nomura also slashed its target price to Rs 197 from Rs 249 earlier, though it has maintained buy call on the stock.

It has lowered its EBITDA estimates for the company by 9-11 percent for FY19-21 and cut FY19-21 EPS estimates by 15 percent after Q2 earnings.

However, Nomura said rising content per car is expected to drive Motherson’s India business and ramp-up of new plants is key. It expects domestic margin to bounce back to 18.6 percent.

Motherson Sumi Systems has reported a 15 percent year-on-year degrowth in its consolidated net profit to Rs 371 crore in Q2, which was lower than CNBC-TV18 poll estimates of Rs 483 crore.

Consolidated revenue during the quarter grew by 12.6 percent to Rs 15,105 crore in September quarter. At operating level, EBITDA increased 5.8 percent to Rs 1,300 crore but margin contracted 50 bps to 8.6 percent YoY.

At 09:52 hours IST, the stock was quoting at Rs 150.00, down Rs 3.60, or 2.34 percent on the BSE.

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