Motherson Sumi share up 3% after Morgan Stanley, CLSA remain positive despite fall in Q4 profit

June 03
14:04 2020

Motherson Sumi Systems share price jumped 3 percent at open on June 3 after the company declared its March quarter results on June 2.

The company reported a 68.4 percent decline in consolidated net profit to Rs 135.66 crore for the fourth quarter ended March 31, mainly affected by the coronavirus pandemic.

It had posted a consolidated net profit of Rs 429.31 crore in the corresponding period of the previous financial year, Motherson Sumi Systems said in a filing to the exchanges. Its total revenue from operations in the fourth quarter stood at Rs 15,159.05 crore as against Rs 17,169.47 a year ago.

Global brokerage firm CLSA has maintained outperform rating on the stock and has cut target to Rs 110 from Rs 125 per share. It is of the view that margin improvement in the global business leads to earnings beat, according to a report by CNBC-TV18.

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The company delivered significant margin expansion in its global mirrors and polymers businesses and has reduced debt by Rs 1,100 crore via strong control of working capital and investments.

CLSA has cut FY21/22 EPS estimates by 74/30 percent respectively and feels that a preliminary plan for 2025 indicates diversification into non-auto segments.

Meanwhile, Morgan Stanley has maintained an overweight call with a target at Rs 103 per share. It is of the view that near-term visibility is low while strong earnings will be led by BS-VI transition, electrification and plant ramp-up.

Jefferies has maintained a hold rating on the stock with target raised to Rs 105 from Rs 75 per share. Good operating performance in Q4 and EBITDA ahead of estimates are led by the healthy performance of subsidiaries, it said.

The company expects a tougher Q2 due to production shutdowns globally and sees an overall improvement sequentially after Q2. The brokerage firm has raised FY21-23 EPS estimates by 9-14 percent, but still 25-29 percent below the street.

“Our consolidated revenues for this fiscal year have remained stable. Considering that global automotive sales have declined in the same period and that the coronavirus pandemic was already impacting China and parts of Europe in the fourth quarter, this is a strong performance under the circumstances,” said Chairman of Motherson Sumi, Vivek Chaand Sehgal.

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