Motherson Sumi nears three-month high; surges 25% post Q2 results

The stock surged 7% to Rs 304, its highest level since September 3, 2015 on the National Stock Exchange.

Motherson Sumi Systems has surged 7% to Rs 304, its highest level since September 3, 2015 on the National Stock Exchange (NSE), on back of heavy volumes.

Post July-September quarter (Q2) results, shares of auto parts and equipment makers have rallied 25% from Rs 242 on November 5, as compared to 2% fall in the Nifty 50.

The company had reported a better-than-expected 27% year-on-year (YoY) jump in consolidated net profit due to the healthy revenue growth and soft commodity prices. The top-line grew strongly by 15% YoY led by robust growth in SMP and pick up in the standalone business.

Angel Broking assigned Accumulate rating on the stock with a target price of Rs 313.

“Motherson Sumi Systems (MSS) continues to report improvement in its operating performance, driven by its strategy of increasing the content per car, improvement in utilization levels at the new plants and profitability improvement measures at Samvardhana Motherson Peguform (SMP). However, the emission scandal at MSS largest customer, Volkswagen (Volkswagen currently accounts for around 40% of the topline) could have a near term impact on the revenues as the brand takes a knock leading to loss of volumes,” broking firm said in a report dated November 18, 2015.

Rohan Korde analyst at Prabhudas Lilladher maintains ‘BUY’ with a lowered price target of Rs 341 (previous TP: Rs 400).

New order pipeline remains strong, debt reduction continues and subsidiary profitability is on an upswing. The management has stated that MSS currently has an unexecuted order book of Euro 12 billion. However, the problems of one of MSS’ key customer – the Volkswagen group ? are unlikely to be resolved in the near?term, and have the potential to result in blips in production schedule over the next one year, added report.

At 10:08 AM, the stock was up 6% at Rs 302 on the NSE with a combined 3.49 million shares changed hands on the NSE and BSE.