Motherson Sumi Wiring deserves rich valuations, say analysts post Q1 show

Shares of Motherson Sumi Wiring India soared up to 4.69 to Rs 70.03 per share on the BSE in Tuesday’s intraday deals. This came after the company reported a 21 per cent rise in profit after tax (PAT) on a year-on-year (YoY) basis for the first quarter of financial year 2024-24 (Q1FY25).

Analysts believe that Motherson Wiring’s Q1 show was muted due to start-up costs of two new plants, resulting in lower-than-estimated growth in profits and operating margins. 

Nonetheless, the auto components manufacturer reported a healthy revenue growth, outperforming the underlying domestic industry volumes led by content increase, analysts at Motilal Oswal noted. 

Analysts at Nuvama Institutional Equities, too, believe that premiumisation and EV transition are behind the company’s content increase further leading to its industry outperformance. 

However, both brokerages have cut their earning per share estimates for the company to factor in increased costs relating to new facilities. Those at Motilal Oswal slashed FY25 and FY26 EPS estimates by 6 per cent and 5 per cent, respectively.

Similarly, Nuvama also reduced its FY25 and FY27 EPS target by 3 per cent each.

Of the two greenfields, one plant commenced operations in July 2024, and the second plant is slated to come on stream by Q1FY26, analysts said. 

Market share leader

Motherson Sumi Wiring along with parent company SAMIL corners over 55 per cent share in passenger vehicle (PVs) wiring harnesses and more than  25 per cent in the two wheeler (2Ws) segment. 

Further analysts say that the company would benefit from Sumitomo’s support via component supplies, technical assistance and new technology products, including gateways, body electronic control unit (ECUs) and junction boxes along with solutions for hybrids and EVs. 

“MSUMI is focusing on strengthening its presence with 26 existing and two upcoming facilities to support demand from customers for ICE, hybrid and EV wiring harnesses,” analysts at Nuvama said. 

Vital Signs 

The brokerages reckon that the company’s EV transition should catalyse content growth with an increase of at least 1.7 times in PVs and at least 3x in 2Ws as the loss of engine wiring harness would be more than offset by the addition of motor, charging, auxiliaries, traction, and battery harnesses.

“Content should grow by up to 1.5x in PVs, with a shift from cars to UVs. Factoring in the industry upcycle and better content, we are building in a 13 per cent revenue CAGR over FY24–27E,” Raghunandhan NL, Manav Shah, Rahul Kumar of Nuvama wrote in a report. 

The company’s Ebitda margin trajectory is likely to continue expanding, led by a better product mix, moderating commodity costs, localization efforts, and rising utilisation rates in the new facilities starting from FY26 onwards, analysts at Motilal said.   

“We believe MSUMI deserves rich valuations, given its strong competitive positioning, top-decile capital efficiency, and benefits of EVs and other megatrends in Autos. The stock trades at 42x/33x FY25E/26E EPS. Reiterate our ‘Buy’ rating with a target price of Rs 80 (premised on 36x June-26E EPS),” the brokerage firm noted. 

Nuvama, too, has a “Buy’ call on the counter with a target price of Rs 88 from earlier Rs 90 and based on 40 times the September FY26 EPS. 

Financial performance

The company reported a net profit of Rs 148.87 crore for June quarter of FY25 riding on strong revenue growth. The company had registered a net profit of Rs 123.13 crore in the same quarter of last year.  

Revenues from operations stood at Rs 2,184.84 crore as against Rs 1,871.84 crore in the year-ago period, up 17 per cent Y-o-Y. Further, total expenses came in higher at Rs 1,991.46 crore as compared to Rs 1,706.25 crore. 

At 11:26 AM; the share price of the company pared all its gains and wad trading 0.76 per cent higher at Rs 70.56 per share on the BSE. By comparison, the BSE Sensex was up 0.71 per cent to 79,321 levels.