Motherson Sumi Wiring Stock Rises As Shares Trade Ex-Bonus; Should you Invest?

Samvardhana Motherson Shares Trade Ex-Bonus: Shares of Samvardhana Motherson started trading ex-bonus today, October 3, ahead of the record date for its bonus issue that it had recommended in the ratio of 1:2. The auto sector stock rose about 0.6 per cent to Rs 73 apiece on the BSE in opening deals.

The board of Motherson Sumi Wiring India on Friday (30 September) recommended issuing 2 bonus equity shares against 5 existing equity shares.

The bonus issue recommendation is subject to the approval of the shareholders.

The company last month informed that it has fixed Wednesday, October 5, 2022 as ‘Record Date’, for the purpose of ascertaining the eligibility of shareholders entitled for issuance of bonus shares by the company.

In August, Samvardhana Motherson International Limited’s (formerly Motherson Sumi Systems Limited) board considered the proposal for bonus equity shares of the company and therefore recommended the issue in the ratio of 1:2, subject to shareholders’ approval.

“The Board of Directors of the Company in its meeting held today, i.e., August 16, 2022, has recommended issue of bonus shares in the ratio of 1 (one) bonus equity share against 2 (two) existing equity shares, subject to approval of the shareholders,” the company had informed in an exchange filing.

Motherson Sumi Wiring India is a leading and fast-growing full-system solutions provider to OEMs, in the wiring harness segment in India. Motherson Sumi Wiring India is a joint venture between Samvardhana Motherson International (SAMIL) [formerly Motherson Sumi Systems] and Sumitomo Wiring Systems (SWS).

The company reported a 59.8 per cent rise in net profit to Rs 125.96 crore on a 49.8 per cent increase in net sales to Rs 1661.68 crore in Q1 FY23 over Q1 FY22.

Should you Invest?

Domestic brokerage and research firm ICICI Securities in a note said that it has brought MSWIL in coverage pursuant to de-merger.

The brokerage house has assigned Buy rating to Motherson Sumi Wiring shares amid structural levers for long term secular growth with a target price of ₹105 apiece.

Key triggers for future price performance, as per the brokerage could be – with pent-up demand in PV space amid strong order book across OEMs & increasing consumer preference for advance technology-enabled vehicles i.e. better wiring harness content, it builds 18 per cent sales CAGR over FY22-25E.

“With increasing, capacity utilisation levels and associated operating leverage at play, margins are seen improving to 13.5 per cent by FY24E-25E FY22: Net cash positive b/s: Rs 280 crore, healthy CFO/FCF generation. The wiring harness acts as a nervous system of an automobile primarily used to transport an electronic signal. Content is pegged at ~2-3 per cent of vehicle price,” the note stated.

“Content/vehicle is set to gain from increasing application of electronics (ADAS, TPMS, connected vehicle, etc.) in automobile & even electrification. Content/vehicle in EV is pegged at ~1.5-2x of ICE vehicle,” it added.

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