Motherson Sumi Systems Ltd: Milestone machine!
(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.