Buy Motherson Sumi Wiring India; target of Rs 45: Emkay Global Financial

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Motherson Sumi Wiring India (MSUMI) delivered a robust 2Q with 47% yoy revenue growth, outperforming its key client MSIL, driven by higher customer volumes, new program launches, premiumization, and optimal utilization of greenfield capacities.
  • The company's EBITDA grew 34% yoy, with EBITDAM improving by ~160bps qoq to 9.2%, despite gross-margin contraction due to higher copper prices, offset by operating leverage from lower employee and other expenses.
  • Management expects PV industry growth to sustain in 2H, despite a higher base, with sustained program launches and ramp-up of 3 greenfield plants providing additional growth lever.
  • MSUMI has a ~3-6M pass-through lag and is actively engaging with customers to recover incremental copper costs and minimum wage revisions.
  • Ongoing cost control initiatives and localization of imported components should further support margin improvement.

Thesis Validation Checklist

  • Investors should watch for signs of sustained growth in the PV industry, new program launches, and the company's ability to pass through incremental costs to customers.
  • Key signals to monitor include revenue growth, EBITDA margin expansion, and the company's ability to maintain its operating leverage.
  • A potential risk to the thesis is a decline in PV industry growth or an inability to pass through incremental costs, which could impact MSUMI's revenue and margin growth.