Mother­son Sumi Sys­tems Ltd: Mile­stone ma­chine!

Money Times - - Market Outlook | Stock Buzz - By Subra­ma­nian Ma­hade­van

(BSE Code: 517334) (CMP: Rs.288.05) (FV: Re.1)

In­cor­po­rated in 1986 as a joint ven­ture with Su­mit­omo Wiring Sys­tems, Delhi based Mother­son Sumi Sys­tems Ltd (MSSL) is a lead­ing, spe­cial­ized au­to­mo­tive com­po­nent man­u­fac­tur­ing com­pany for OEMs (orig­i­nal equip­ment man­u­fac­tur­ers). It of­fers in­no­va­tive value-added prod­ucts, ser­vices and so­lu­tions. It hit the cap­i­tal mar­kets in 1993. With a di­verse global clien­tele, MSSL has pres­ence in 41 coun­tries across 6 con­ti­nents. It is the largest auto an­cil­lary in In­dia and fea­tures among the ‘Fab 50 Com­pa­nies of Asia’ by the Forbes mag­a­zine. It is the flag­ship com­pany of the Sam­vard­hana Mother­son Group (SMG), which is ranked 23rd among global au­to­mo­tive sup­pli­ers by Au­to­mo­tive News.

Given the man­age­ment’s track record of meet­ing ag­gres­sive tar­gets with cus­tomer-cen­tric ap­proach and its in­vestor­friendly at­ti­tude (reg­u­lar div­i­dends and bonus is­sues [9 times] since 1997), we are quite op­ti­mistic about its vi­sion of achiev­ing $18 bn by 2020 de­spite the mi­nor head­winds. Its rev­enues have grown from Rs.10 crore in 1996 to Rs.55858 crore in 2018. It has done over 17 over­seas buy­outs in the last 25 years. The man­age­ment’s 5-year strat­egy of 3Cx15 un­til 2020, which means that no sin­gle cus­tomer, coun­try or com­po­nent should con­sti­tute more than 15% of the to­tal turnover, au­gurs well to ac­com­plish its $18 bn turnover tar­get. MSSL’s three ac­qui­si­tions be­tween 2014 and 2015 i.e. i) Stoner­idge, a wiring har­ness busi­ness in USA; ii) Minda Schenk, an in­te­rior and ex­te­rior plas­tic parts maker; and iii) Scherer & Trier, an ex­tru­sion and hy­brid parts maker in Ger­many, has laid a strong foun­da­tion with good or­der vis­i­bil­ity for its in­or­ganic growth strat­egy. Other ac­qui­si­tions like the PKC group’s in Jan­uary 2017 and Rey­del Au­to­mo­tive in Au­gust 2018 were re­ally syn­er­getic of­fer­ing in­cre­men­tal op­por­tu­ni­ties to sup­port OEMs around the world.

The stock can eas­ily de­liver up to 50% re­turns in the next 2-3 years with lit­tle down­side from the cur­rent level. Ac­cu­mu­late on ev­ery de­cline.

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