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Stock recommendation: Motherson Sumi Systems — Sell — Target price Rs 280
Publish date: August 8, 2018
Results update: Weak quarter
Key highlights
- Mothers Sumi System’s consolidated EBITDA grew by 19% (YoY) but that remained 12% below our estimates due to weak profitability of its businesses.
- The company’s net net debt increased, possibly due to high capital expenditure to commission new plants.
- The company, which primarily deals in auto ancillary products, saw its standalone revenues grow by 21% (YoY) due to high copper prices and growth in domestic vehicle production.
Valuation & outlook
Low profitability and rich stock valuation are two reasons for the market to downgrade the company’s estimates.
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