The stock market is not all about prediction but about selecting the good companies or the businesses you want to invest in and hold it like for a long time to have the profits come to you with the progressing company. Motherson Sumi Ltd. is such a company with its diverse portfolio in the automotive sector with its operations worldwide, can be a good company to study the fundamentals.
Motherson Sumi Systems Ltd.
This is a flagship company of the Samvardhana Motherson Group and is a listed entity. It is primarily a full system provider with a diverse portfolio in automotive and other industries stationed across Asia, Africa, North and South America, Australia and Europe. It was established in 1986 in a joint partnership with Sumitomo Wiring systems, a Japan-based company. It has been listed in stock exchange since 1993.
Wiring Harness : It makes wiring for the automotive industry including different vehicle segments
Vision Systems : It includes the rearview mirror systems with specializations in intelligent camera systems for automotive applications
Modules and polymer products: The aesthetic and other related components come in this domain including bumpers, rock panels, instrument panels, etc
Metal products : Cabins, shock absorbers, cutting tools, precision machined metal components and other such products are made by MSSL
Retail and services : OEM services and business-to-business supply system to have a seamless network.
Logistics : Better solutions to clients and OEM customers with cutting-edge technology
Management of the Company
Mr.Pankaj Mittal - He is the whole-time director and chief operating officer. He has done BSc., LLB, PGBDM. He has vast experience in the electronic distribution system in the automobile industry.
Mr. Sushil Chandra Tripathi - He is a retired IAS officer and an independent director of the company having a vast experience in Economy, Management, Finance, and Taxation areas.
Mr. Arjun Puri - He is also an independent director having experience in planning and other related areas.
Mr.Gautam Mukherjee - He is an independent director and a banker having vast field experience in Finance, Planning, Project Management and other related areas.
Ms.Geeta Mathur - A Chartered Accountant having a vast experience in Finance, Treasury, Strategic Planning etc.
Mr.Takeshi Fujimi - A director who is engaged in quality assurance of wiring harnesses for Suzuki, Toyota, Mazda, Mitsubishi etc.
Fundamental Valuation(as on 13 October 2019)on consolidated basis
Market Cap : 30,300 Crores rupees
Book Value : 34.71(as on 13 October 2019)
Return on Equity(ROE) : 15.42%(Quite Good with a 7 year average of around 21.5 percent)
Return on capital employed(ROCE) : 16.91%(Quite Good)
Promoter holding : 61.72%(Shows trust of the stakeholders in the company)
Price to Earning : 19.55(Greater than industry P/e of 13.48 shows expensive valuation than the average but also depicts the market optimism in the stock)
Working capital : 4,529 Crores rupees(shows extra leverage to reinvest in operations)
Debt : 1136 Crores rupees(under the working capital)
EPS : 4.37(for the time starting from March 2019)
PEG Ratio : 1.22(not so impressive)
Stock price CAGR : 21 %(10 years consideration)
Sales variance quarterly : 13 %(highest in the industry for the quarters of the year 2019)
Balance Sheet (Standalone)Analysis
The balance sheet study has been carried out and the following data are available for the year March 2019.
Share capital - 316 crores rupees (compared to 210 crores for the year 2018)
Reserves - 6122 crores rupees (compared to 5970 crores for the year 2018)
Borrowings - 1136 crores rupees (compared to 1155 crores for the year 2018)
Other Liabilities - 1496 crores rupees (compared to 1478 crores for the year 2018)
Total Liabilities - 9070 crores rupees (compared to 8813 crores for the year 2018)
Fixed Assets - 1,796 crores rupees (compared to 1547 crores for the year 2018)
CWIP - 91 crores rupees (compared to 92 crores for the year 2018)
Investments - 4,603 crores rupees (compared to 4654 crores for the year 2018)
Other Asstes - 2,580 crores rupees (compared to 2520 crores for the year 2018)
Total Assets - 9070 crores rupees (compared to 8813 crores for the year 2018)
Note- The detailed balance sheet for both standalone and consolidated has been provided as an attachment Kindly refer for your own research.
Profit and loss statement standalone
Sales - 7,581 crores rupees(compared to 7466 crores for the year 2018)
Expenses -6,308 crores rupees(compared to 6134 crores for the year 2018)
Operating profit - 1,273 crores rupees(compared to 1332 crores for the year 2018)
OPM - 17%(compared to 1332 crores for the year 2018)
EPS - 2.58(compared to 2.79 for the year 2018)
Cash Flow statement standalone on March 2019
Cash from Operating Activity - 942 crores rupees inflow(+)
Cash from Investing Activity - 271 crores rupees outflow(-)
Cash from Financing Activity -640 crores rupees outflow(-)
Strengths of the company
Dominant market share in the external rear-view mirrors, globally.
The biggest manufacturer of the wiring harnesses for passenger vehicles in India.
Various clients with Volkswagen, as the biggest customer, with Hyundai, Maruti Suzuki, Nissan Motor, BMW, Ford Motor Company, Renault, Daimler AG, etc.
Europe is the largest market of MSSL with simultaneous exposure increasing in North and South America and Asia
The continuous acquisitions are being made by the group to capture other segments too.
Weaknesses of the company
Though the sales for the year 2018-19 have increased, the earnings before interest and taxes(EBIT) have decreased, on the standalone basis, which shows concern on account of changing vehicle norms in Europe, its major market base.
The share of trade with the Volkswagen group has decreased since 2014 due to the execution of more orders with Daimler and the acquisition of SMRC has made MSSL liable to complete its orders too. The VWG is the largest partner though.
The cyclicality of the global automobile demand has led to the slowdown on account of tariff wars in the US which are affecting the OEM of Europe.
The customers of Wiring harnesses and Modules and Polymer products have decreased within India but the global presence has increased simultaneously.
The intense acquisition policy could lead to the stress on the assets and also the capacity utilization.
The MSSL is a well-established company in the automotive sector with a wide global presence with its diverse portfolio and a well- planned competitive strategy. It can be a really good stock to be included in your portfolio.
Disclaimer- The article is to give just a start to your awareness about the company. Do your own research before investing.
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