Motilal Oswal initiates coverage on MSWI with ‘buy’ rating; sees over 29% upside

The brokerage house has initiated with a ‘Buy’ rating on the stock with a target price of Rs 80, signaling a potential upside of 29 per cent in the counter, from its previous close of Rs 62.40 on Thursday.

“MSUMI, a JV between Sumitomo Wiring System (SWS) and Motherson Group, is a market leader in the Indian wiring harness industry with a market share of over 40 per cent. It’s a pure play wiring harness player with a focus on the domestic market and is a direct beneficiary of the Indian automotive industry recovery,” it noted.

Motilal Oswal believes that the company deserves rich valuations due to its: a) strong competitive positioning, b) top-decile capital efficiency, and c) position as a prime

beneficiary of EVs and other megatrends in Autos.

The wiring harness content is likely to gain from an increasing electronic content in Indian PV and electrification of vehicles.

“We estimate the company’s revenue/EBITDA/PAT to report 15%/22%/23% CAGR over FY22-25E. RoIC would improve to 62 per cent by FY25E from 53 per cent in FY22, though RoE would decline to 41 per cent from 51 per cent over the same period, due to cash drag,” it added.

Motherson Sumi Wiring India (MSWI), the demerged entity of

(MSS), made its debut in March 2022. Shares of Motherson Sumi Wiring India listed at Rs 66 on BSE. On NSE, the stock opened at Rs 65.20 and hit a high of Rs 68.45 so far in trade.

The shareholders were issued one share of MSWI for every share of MSS. With the restructuring, MSS controls the overseas business while MSWI is focused on the Indian wiring harness business.

Motherson Sumi Systems in January 2021 said that it would demerge its wiring harness undertaking and list it as a separate entity. The promoters of the company are Motherson Sumi and Sumitomo itself.

MSWI derives nearly two-third of revenue from the passenger vehicle (PV) business, around 10 per cent each from two-wheelers and commercial vehicles and the balance from off-road vehicles. It has a market share of 40-45 per cent in the Indian wiring harness segment.

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