Motherson Sumi Wiring Recommended as a Buy, Target Price: Rs 48

Motherson Sumi Wiring Outperforms Industry Average in Qtr With 32.9% YoY Revenue Growth

Motherson Sumi Wiring (MSUMI) has delivered a strong quarterly performance, driven by new model launches and higher content per vehicle. The company's revenue growth of 32.9% year-over-year (YoY) outpaced the industry average. However, MSUMI's gross margin was impacted by elevated copper prices, resulting in a sequential margin decline of 293 basis points (bps). Additionally, the company faced start-up losses from greenfield plants, which further weighed down its margin.

Despite these headwinds, MSUMI maintained a debt-free balance sheet, supported by healthy cash flows. The company's financial position is expected to remain robust, despite the current margin pressure. Analysts believe that the EBITDA margin will remain under pressure due to commodity volatility in the near term. However, the margin is expected to improve gradually from FY27E and strengthen further in FY28E, as cost is passed on to customers, utilization improves, and operating leverage kicks in.

Outlook

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In light of the margin pressure, analysts have revised their earnings per share (EPS) estimates for MSUMI downwards. The FY27/28E EPS estimate is now expected to be 2.7% and 0.9% lower, respectively. Despite this revision, the analysts maintain their target price of INR 48 on FY28E EPS. Considering the recent decline in the stock price, the rating has been upgraded from 'ADD' to 'BUY'.

Note: The table above provides a comparison of MSUMI's revenue growth and gross margin for FY27E and FY28E. However, the actual numbers for gross margin and EBITDA margin are not provided in the original text.