Motherson Sumi (MOTSUM)

CMP: | 105 Target: | 100 (-5%) Target Period: 12 months HOLD

August 13, 2019

Muted growth prospects to weigh on rich valuations... Motherson Sumi Systems (MSSL) reported a steady Q1FY20 performance.

Reported consolidated revenues came in at | 16,793 crore (up 13.7% YoY). Among subsidiaries, SMR posted flattish constant currency revenue at € 403 Particulars million while SMP revenue increased 35% YoY to € 1071 million, backed by Particular | crore greenfield capacity commissioning. Consolidated EBITDA margins Market Capitalization 33,158.3 expanded 24 bps QoQ to 7.5%, aided by recent lease accounting changes Total Debt (FY19) 11,522.8 (AS-116). Adjusting for this, EBITDA margins were at 6.9%. Consequent PAT Cash & Investments (FY19) 3,547.0 (after minority interest) declined 25.2% YoY to | 332 crore. EV (| Crore) 41,134.2

Result Update Result 52 week H/L (|) 212 / 91 Global auto-ancillary, marred by decline in auto volumes! Equity capital | 315.8 Crore Face value | 1 MSSL is truly a global auto ancillary player with outside India constituting

~88% of its consolidates sales and India comprising the rest at 12% of sales. It has high exposure to Europe with Germany accounting for the large chunk Key Highlights and constituting ~23% of sales. US contribution is also at a healthy 15% of sales. Its major clients include Audi (13% of sales), Mercedes Benz (9%),  Ramp up of greenfield facility at Volkswagen (9%), Ford (5%), etc. Globally, there has been a downtick in SMP led to sales growth of 14% auto sales volume tracking muted economic prospects amid uncertainty YoY in Q1FY20 surrounding the tariff barriers as well as Brexit. Domestically, increase in  Margins came in muted at 6.9% cost of ownership is still weighing on demand with bloated channel (adjusted for change in accounting) inventory. Thus, muted auto growth prospects will limit growth at its key  Muted growth prospects prevail in domestic as well as global markets ancillary supplier i.e. MSSL leading to sub-par growth prospects, going tracking muted auto sales volume forward. We build in 7.2% sales CAGR at MSSL over FY19-21E.  Maintain HOLD rating on stock with revised target price of | 100 valuing Muted sale growth to limit margin increase! company at 18x P/E on consolidated FY21E EPS of | 5.6 MSSL has been a capital efficient player with a history of a sharp turnaround  RoE profile of ~14%, FCF yield of at its key inorganic acquisitions leading to a stable margin profile (8-10%). ~6% provide some comfort Margins, however, are currently depressed tracking the initial ramp up costs at its key facility at SMP. With utilisation set to increase amid single digit Research Analyst topline growth as well as stable commodity prices, we expect EBITDA Research Equity Retail Shashank Kanodia, CFA margins to improve, going forward. The quantum may, however, be limited – [email protected] to just 20 bps on an aggregate basis in FY19-21E. We expect MSSL to clock EBITDA margins of 7.8% in FY20E and thereafter 8.6% in FY21E. Jaimin Desai [email protected] Valuation & Outlook

Going forward, for MSSL we estimate sales, EBITDA, PAT CAGR of 7.2%,

8.6% & 4.6%, respectively, in FY19-21E. PAT growth lags EBITDA growth Securities ICICI tracking an increase in depreciation and interest charge as new facilities get commissioned and also due to a change in accounting methodology involving long term leases. The company’s strategy of diversification across geographies and products would remain key to navigating the current challenging phase in global auto industry. We value MSSL at | 100 i.e. 18x P/E on FY21 EPS of | 5.6 with a HOLD rating on the stock.

Key Financial Summary

Key Financials FY17 FY18 FY19 FY20E FY21E CAGR (FY19-21E) Net Sales 42,493.4 56,293.3 63,522.9 69,220.6 73,012.7 7.2% EBITDA 4,284.7 5,122.6 5,348.4 5,373.3 6,304.3 8.6% EBITDA Margins (%) 10.1 9.1 8.4 7.8 8.6 Net Profit 1,554.3 1,597.0 1,613.2 1,468.0 1,765.2 4.6% EPS (|) 4.9 5.1 5.1 4.6 5.6 P/E 21.3 20.8 20.6 22.6 18.8 RoNW (%) 19.6 17.4 14.7 12.4 13.7 RoCE (%) 16.0 15.7 13.2 11.7 14.6

Source: ICICI Direct Research, Company Result Update | Motherson Sumi ICICI Direct Research

Exhibit 1: Variance Analysis Q1FY20 Q1FY20E Q1FY19 YoY (%) Q4FY19 QoQ (%) Comments Topline came in ahead of our estimates tracking beat on Total Operating Income 16,792.5 16,024.7 14,775 13.7 17,169 -2.2 growth rate at company's SMP division Savings was realised on raw material cots with RM costs Raw Material Expenses 9,658.6 9,338.5 8,509.1 13.5 9,974.0 -3.2 as a percentage of sales coming in at 57.5%, down 60 bps QoQ Employee Expenses 3,917 3,631 3,230 21.3 3,955 -1.0 Employee costs came in higher at 23.3% of sales Other expenses 1,961.9 1,941.9 1,624.0 20.8 1,997.5 -1.8 Operating Profit (EBITDA) 1,255.0 1,113.0 1,412 -11.1 1,243 1.0 EBITDA margins came in higher tracking savings realised in EBITDA margin (%) 7.5 6.9 9.6 -208 bps 7.2 24 bps RM costs and is also supported by change in accounting standard methodology (Ind-AS 116) Other Income 54.7 53.8 44.7 22.5 68.2 -19.7 Depreciation came in higher due to reclassification of long Depreciation 637 544 447 42.4 552 15.4 time operating lease as non current liability Interest 156 107 100 55.2 103 51.4 PAT came in higher tracking beat on EBITDA margin partly PAT 331.6 299.8 443 -25.2 410 -19.1 limited by increase in interest as well as depreciation EPS 1.0 0.9 1.4 -25.2 1.3 -19.1 Key Metrics (as reported in Q1FY20 results) Standalone revenue (| crore) 1843 1761 2004 -8.0 1851 -0.5 Standalone margin (%) 17.0 12.7 17.1 -16 bps 18.1 -117 bps Standalone margins came in higher at 17% of sales SMR revenue ( € million) 402 413 403 -0.2 422 -4.7 SMR margin (%) 10.9 11.8 11.2 -22 bps 11.6 -66 bps SMP revenue ( € million) 1071 1006 792 35.2 1053 1.7 SMP revenue came in higher 37% YoY at €1071 million SMP margin (%) 2.6 2.2 6.2 -359 bps 1.9 70 bps

Source: Company, ICICI Direct Research

Exhibit 2: Change in estimates FY20E FY21E (| Crore) Old New % Change Old Introduced % Change Comments Broadly maintain topline estimate tracking ramp up of Revenue 68,687 69,221 0.8 72,577 73,013 0.6 production at SMP and robust demand in domestic wiring harness business due to BS-VI transition EBITDA 5,285 5,373 1.7 6,355 6,304 -0.8 EBITDA Margin (%) 7.7 7.8 7 bps 8.8 8.6 -12 bps Increase in depreciation and interest outgo leads to sharp PAT 1,623 1,468 -9.6 2,063 1,765 -14.4 revision in PAT estimates for FY20E & FY21E EPS (|) 5.1 4.6 -9.6 6.5 5.6 -14.4

Source: Company, ICICI Direct Research

Exhibit 3: Assumptions Current Earlier Comments FY18 FY19 FY20E FY21E FY20E FY21E Standalone revenues (| crore) 7,478 7,581 7,847 9,235 8,316 9,529 Standalone margins (%) 18.5 16.8 17.2 16.9 16.5 17.1 Revise topline, margin estimates tracking muted demand SMR revenues ( € million) 1,576.0 1,603.0 1,610.1 1,642.3 1,643.1 1,684.2 prospects both domestically as well as globally SMR margins (%) 11.5 11.4 11.4 12.0 11.8 12.0 SMP revenues ( € million) 3,451.0 3,678.0 4,330.7 4,547.2 4,191.9 4,401.5 SMP margins (%) 7.2 4.3 3.3 5.0 3.3 5.0

Source: Company, ICICI Direct Research

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Annual Report FY19 – Key takeaways Total order book at SMRPBV level was at | 1.47 lakh crore (| 45,312 crore worth orders won in FY19).

Exhibit 4: MSSL group structure

Source: Company Business developments during the year A. Wiring harness  Acquired rolling stock business of Bombardier Transportation, UK  Order wins in new segments (recreational vehicles, construction equipment) and new customers in existing segments (engines, military vehicles, agriculture) increased CV and agriculture contribution in North America mix

 MSSL collaborated in new truck launch by a client and supplied new electrical architecture for the same

 Became key supplier to leading South American truck OEM

 Capacity expansion under way in South America

 Won order for wiring harness (electric trucks) supply to a leading global customer in Japan

 Pithampur facility production ramped up; new wire facility inaugurated

B. Vision systems  Added new customers in Europe, India & China  Manufacturing facility capacity expansion under way in India & China, with localisation focus in glass actuators to drive efficiencies

C. Modules & polymers  MATE (polymer business) ventured into manufacturing parts for consumer goods companies

 Venturing towards vertical integration with PKC for wiring harness and with other polymer companies

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SMRC (erstwhile Reydel Group)  Acquired in August 2018 for US$105 million (net of cash acquired US$96 million)

 The company has a strong footprint in France, Spain, South America and Asia, with the acquisition helping MSSL expand into Croatia, Argentina, Indonesia, Morocco & the Philippines Incurred | 2,685.3 crore capex at consolidated level  Its product portfolio spanning cockpit modules, instrument panels, door during FY19 panels, floor consoles, decorative parts, interior products, etc

 FY19 revenue amounted to €5,278 million, up 5% YoY SMRPBV incurred capex of €255 million during FY19, of which ~40% i.e. €102 billion was towards Financial developments during FY19 new facilities or expansion at existing facilities  Adoption of Ind-AS-115 (revenue from contracts with customers) (mainly at SMR and SMP) resulted in lowering of FY19 consolidated revenues by | 5,404.6 crore, with no impact at PAT level Standalone capex during FY19 was at | 397.6 crore

 SMRPBV entered into loan facility of US$60 million (59 months tenure), maturing in August 2023

 Company repaid senior unsecured bonds amounting to €97 million

Exhibit 5: Client wise FY19 revenue mix Exhibit 6: Domestic vs. exports revenue mix at MSSL (consolidated) FY18 FY19 Growth % Amount (| crore) % Amount (| crore) Outside India 87 48,753.2 88 55,144.2 13.1 Within India 13 7,104.8 12 7,427.4 4.5

Total 100 55,858.0 100 62,571.6 17.6 Source: Company

Source: Company

Exhibit 7: Country-wise revenue mix at MSSL

Source: Company

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Financial story in charts

Exhibit 8: Segment wise topline trend We expect sales to grow at a CAGR of 7.2% over 80,000 FY19-21E 70,000 13163 13185 60,000 12450 On FY19 basis; SMR constituted ~20% of sales 10730 which involves manufacturing of mirrors/vision 50,000 3403 system. SMP constitutes ~47% of sales and is 4473 40,000 36605 largely involved in manufacturing of cockpit 29761 34608 25974 modules, instrument clusters, door panels, bumpers (| crore) (| 30,000 22037 18992 etc. Both SMP & SMR supply to PV space 20,000 11,846 12,965 12,866 13,221 10,566 11,692 10,000 PKC constitute ~15% of sales and is involved in 5,350 6,313 7,478 7,581 7,847 9,235 - manufacturing electronics and associated FY16 FY17 FY18 FY19 FY20E FY21E infrastructure primarily for CV space Standalone SMR SMP Other businesses

Source: Company, ICICI Direct Research

Exhibit 9: Consolidated EBITDA and EBITDA margin trend 10,000 12 10.1 9,000 9.5 9.1 10 8,000 8.4 8.6 7.8 7,000 8 We expect EBITDA margin profile to improve as 6,000 production ramps up at greenfield facilities 5,000 6

4,000 (%) (| crore) (|

3,000 4

6,304.3 6,304.3

5,373.3 5,373.3 5,348.4 5,348.4

2,000 5,122.6 2 4,284.7 4,284.7

1,000 3,548.2 0 0 FY16 FY17 FY18 FY19 FY20E FY21E

EBITDA Margins (%)

Source: Company, ICICI Direct Research

Exhibit 10: Consolidated profitability trend

2,000 4 1,800 3.7 3.5 4 1,600 3 1,400 2.8 1,200 2.5 2.4 3 2.1

1,000 2 (%) We build in 4.6% CAGR PAT growth at MSSL over (| crore) (|

800 1,765 FY19-21E to | 1765 crore in FY21E

1,613 1,613 2

1,597 1,597 1,554 1,554 600 1,468 1,292 1,292 1 400 200 1 0 0 FY16 FY17 FY18 FY19 FY20E FY21E PAT Margins (%)

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 5 Result Update | Motherson Sumi ICICI Direct Research

Exhibit 11: Segment wise EBITDA margin profile

25.0

19.4 20.2 20.0 18.9 16.8 17.2 16.9 EBTDA margin profile expected to be stable in 15.0 12.0 standalone entity as well as SMR level. However, 10.9 11.5 11.4 11.4

10.5 post costs rationalisation, we expect margins to (%) 10.0 6.6 7.3 7.2 improve at SMP to ~5% in FY21E, which provides 4.3 5.0 fillip to our earnings 5.0 3.3

- FY16 FY17 FY18 FY19 FY20E FY21E

Standalone SMR SMP

Source: Company, ICICI Direct Research

Exhibit 12: Consolidated return ratios trend 35 29.4 30

25 19.6 20 17.4 21.0 14.7

(%) 13.7 15 12.4 16.0 15.7 14.6 Return ratio profile seen picking up on the back of 10 13.2 11.7 improvement in margins in FY21E. RoCE profile 5 stable at ~14% over FY19-21E

0 FY16 FY17 FY18 FY19 FY20E FY21E RoCE RoE

Source: Company, ICICI Direct Research

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Exhibit 13: Key valuation metrics Revenues Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%) FY17 42,493 14.2 4.9 20.3 21.3 9.0 19.6 16.0 FY18 56,293 32.5 5.1 2.7 20.8 8.0 17.4 15.7 FY19 63,523 12.8 5.1 1.0 20.6 7.7 14.7 13.2 FY20E 69,221 9.0 4.6 (9.0) 22.6 7.5 12.4 11.7 FY21E 73,013 5.5 5.6 20.2 18.8 6.1 13.7 14.6

Source: Bloomberg, ICICI Direct Research

Exhibit 14: MSSL currently trades at ~18.8x FY21E EPS 300

250

200

150 (|)

100

50

0

Feb-11 Feb-12 Feb-16 Feb-17 Feb-10 Feb-13 Feb-14 Feb-15 Feb-18 Feb-19

Nov-09 Nov-12 Nov-13 Nov-17 Nov-18 Nov-10 Nov-11 Nov-14 Nov-15 Nov-16

Aug-10 Aug-11 Aug-14 Aug-15 Aug-16 Aug-19 Aug-09 Aug-12 Aug-13 Aug-17 Aug-18

May-12 May-13 May-17 May-10 May-11 May-14 May-15 May-16 May-18 May-19 Price 46x 40x 34x 29x 23x 18x 12x

Source: Company, ICICI Direct Research

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Exhibit 15: Recommendation history vs. consensus 300 100.0

250 80.0 200 60.0

(|) 150 (%) 40.0 100

50 20.0

0 0.0 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19

Series1 Idirect target Consensus Target Mean % Consensus with BUY

Source: Reuters, ICICI Direct Research

Exhibit 16: Top 10 shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Samvardhan Motherson International, Ltd. 30-Jun-19 33.4 1,055.8 0.00 2 Sumitomo Electric Industries Ltd 30-Jun-19 25.1 792.6 0.00 3 ICICI Prudential Asset Management Co. Ltd. 30-Jun-19 4.2 133.5 7.53 4 Sehgal (Vivek Chaand) 30-Jun-19 2.3 73.2 0.00 5 SBI Funds Management Pvt. Ltd. 30-Jun-19 1.5 48.6 0.16 6 Axis Asset Management Company Limited 31-Mar-19 1.1 36.2 -3.03 7 Reliance Nippon Life Asset Management Limited 30-Jun-19 1.1 36.1 5.54 8 The Vanguard Group, Inc. 30-Jun-19 1.1 33.8 -0.26 9 Capital World Investors 31-Mar-19 1.1 33.2 0.00 10 Hermes Investment Management Ltd. 31-May-19 0.9 28.4 0.00 Source: Reuters, ICICI Direct Research

Exhibit 17: Recent activity Buys Sells Investor name Value (M) Shares (M) Investor name Value(M) Shares (M) ICICI Prudential Asset Management Co. Ltd. +13.32M +7.53M Capital Research Global Investors -34.46M -19.48M Reliance Nippon Life Asset Management Limited +9.81M +5.54M AllianceBernstein L.P. -16.40M -9.27M DSP Investment Managers Pvt. Ltd. +8.08M +4.57M Baron Capital Management, Inc. -9.13M -5.16M APG Asset Management N.V. +8.37M +3.87M Kotak Mahindra Asset Management Company Ltd. -5.88M -3.33M Columbia Threadneedle Investments (US) +3.34M +1.89M Axis Asset Management Company Limited -6.56M -3.03M Source: Reuters, ICICI Direct Research

Exhibit 18: Shareholding pattern (in %) Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Promoter 61.7 61.7 61.7 61.7 61.7 FII 18.3 17.1 17.5 18.1 16.4 DII 9.7 10.3 9.9 9.7 11.1 Others 10.3 10.8 10.9 10.5 10.9 Source: Company, ICICI Direct Research

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Financial Summary

Exhibit 19: Profit and loss statement | crore Exhibit 20: Cash flow statement | crore (Year-end March) FY18 FY19 FY20E FY21E (Year-end March) FY18 FY19 FY20E FY21E Total operating Income 56293.3 63522.9 69220.6 73012.7 Profit after Tax 1597.0 1613.2 1468.0 1765.2 Growth (%) 32.5 12.8 9.0 5.5 Add: Depreciation 1,575.2 2,058.2 2,422.7 2,555.4 Raw Material Expenses 34,312.1 36,738.3 39,863.5 42,194.7 (Inc)/dec in Current Assets -3,450.6 -2,300.4 -1,782.4 -1,059.9 Employee Expenses 11,067.8 14,169.4 15,925.6 16,561.1 Inc/(dec) in CL and Provisions 1,868.4 2,913.9 1,337.4 920.6 FX (gain)/loss 0.0 0.0 0.0 0.0 CF from operating activities 1590.0 4284.9 3445.8 4181.3 Other expenses 5,790.8 7,266.8 8,058.2 7,952.6 (Inc)/dec in Investments 0.0 0.0 0.0 0.0 Total Operating Expenditure 51,170.7 58,174.5 63,847.3 66,708.4 (Inc)/dec in Fixed Assets -4,284.1 -4,457.5 -2,200.0 -2,000.0 EBITDA 5122.6 5348.4 5373.3 6304.3 Others 365.8 300.4 213.5 494.1 Growth (%) 19.6 4.4 0.5 17.3 CF from investing activities -3918.3 -4157.1 -1986.5 -1505.9 Depreciation 1,575.2 2,058.2 2,422.7 2,555.4 Issue/(Buy back) of Equity 8.1 70.2 105.3 0.0 Interest 410.8 423.2 611.8 548.5 Inc/(dec) in loan funds 209.2 1,171.8 -800.0 -1,500.0 Other Income 170.1 220.2 218.3 223.0 Dividend paid & dividend tax -331.6 -559.4 -568.4 -568.4 PBT 3306.7 3087.2 2557.1 3423.4 Inc/(dec) in Sec. premium -37.6 2,644.8 503.3 34.3 Others 0.0 0.0 0.0 0.0 Others 375.2 -2,689.7 -608.6 -223.8 Total Tax 1,007.1 1,102.2 870.9 1,164.0 CF from financing activities 223.3 637.7 -1368.4 -2257.9 Reported PAT 1597.0 1613.2 1468.0 1765.2 Net Cash flow -2,105.0 765.4 90.8 417.5 Growth (%) 2.7 1.0 -9.0 20.2 Opening Cash 4,886.5 2,781.6 3,547.0 3,637.8 EPS (|) 5.1 5.1 4.6 5.6 Closing Cash 2781.5 3547.0 3637.8 4055.3 Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 21: Balance Sheet | crore Exhibit 22: Key ratios (Year-end March) FY18 FY19 FY20E FY21E (Year-end March) FY18 FY19 FY20E FY21E Liabilities Per share data (|) Equity Capital 210.5 315.8 315.8 315.8 EPS 5.1 5.1 4.6 5.6 Reserve and Surplus 9,673.2 10,647.0 11,546.5 12,553.8 Cash EPS 10.0 11.6 12.3 13.7 Total Shareholders funds 9,883.7 10,962.7 11,862.3 12,869.6 BV 31.3 34.7 37.6 40.8 Total Debt 10,351.0 11,522.8 10,722.8 9,222.8 DPS 2.3 1.5 1.5 2.0 Deferred Tax Liability 523.6 576.2 627.9 662.3 Cash Per Share 8.8 11.2 11.5 12.8 Minority Interest / Others 2,960.0 3,479.7 3,834.4 4,472.7 Operating Ratios Total Liabilities 24944.1 27863.0 28487.5 28746.3 EBITDA Margin (%) 9.1 8.4 7.8 8.6 Assets PBIT / Net sales (%) 6.3 5.2 4.3 5.1 Gross Block 14,313.5 19,878.9 21,945.7 23,945.7 PAT Margin (%) 2.8 2.5 2.1 2.4 Less: Acc Depreciation 4,177.0 5,825.0 8,247.7 10,803.2 Inventory days 26.0 26.8 28.0 28.0 Net Block 10136.5 14053.9 13698.0 13142.5 Debtor days 42.6 42.1 42.0 42.0 Capital WIP 2,584.9 1,066.8 1,200.0 1,200.0 Creditor days 58.8 61.3 61.0 61.0 Total Fixed Assets 12,721.4 15,120.7 14,898.0 14,342.5 Return Ratios (%) Investments 3,125.2 3,085.2 3,235.2 3,385.2 RoE 17.4 14.7 12.4 13.7 Goodwill 2264.3 2211.8 2211.8 2211.8 RoCE 15.7 13.2 11.7 14.6 Inventory 4,013.2 4,663.5 5,310.1 5,601.0 RoIC 26.0 19.3 17.1 22.1 Debtors 6,570.1 7,329.2 7,965.1 8,401.5 Valuation Ratios (x) Loans and Advances 42.6 22.6 24.7 26.0 P/E 19.3 20.6 22.6 18.8 Other Current Assets 4,639.3 5,550.3 6,048.1 6,379.5 EV / EBITDA 8.0 7.7 7.5 6.1 Cash 2781.5 3547.0 3637.8 4055.3 EV / Net Sales 0.7 0.6 0.6 0.5 Total Current Assets 18,046.6 21,112.6 22,985.8 24,463.3 Market Cap / Sales 0.6 0.5 0.5 0.5 Creditors 9,064.0 10,661.3 11,568.4 12,202.1 Price to Book Value 3.4 3.0 2.8 2.6 Provisions 132.9 157.9 171.3 180.7 Solvency Ratios Other current liabilities 3356 4648 5065 5342 Debt/EBITDA 2.0 2.2 2.0 1.5 Total Current Liabilities 12,553.3 15,467.3 16,804.7 17,725.3 Debt / Equity 1.0 1.1 0.9 0.7 Net Current Assets 5493.3 5645.4 6181.1 6738.0 Current Ratio 1.2 1.1 1.2 1.2 Other non-current Asset 713.6 1187.7 1294.2 1365.1 Quick Ratio 0.9 0.8 0.8 0.8 Deferred Tax Asset 626.1 612.3 667.2 703.8 Source: Company, ICICI Direct Research Application of Funds 24944.1 27863.0 28487.5 28746.3

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 9 Result Update | Motherson Sumi ICICI Direct Research

Exhibit 23: ICICI Direct coverage universe (Auto & Auto Ancillary) Sector / Company CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) (|) TP(|) Rating (| Cr) FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E Amara Raja (AMARAJ) 645 590 Reduce 11017 28.3 31.1 33.8 22.3 20.3 18.6 11.0 9.7 8.7 21.2 21.0 20.5 14.5 14.3 14.0 Apollo Tyre (APOTYR) 153 145 Hold 8741 11.9 14.8 16.2 12.6 10.1 9.3 6.8 6.8 6.4 8.0 7.7 8.2 8.3 8.0 8.2 Ashok Leyland (ASHLEY) 61 70 Hold 17951 6.8 5.3 5.5 9.1 11.5 11.1 6.1 6.6 6.2 26.9 23.1 22.7 24.3 17.4 16.7 Bajaj Auto (BAAUTO) 2632 2360 Reduce 76175 161.6 160.5 168.7 15.4 15.5 14.8 11.0 10.3 9.4 21.0 19.2 25.3 19.9 19.1 18.1 Balkrishna Ind. (BALIND) 729 740 Hold 14087 40.5 40.9 45.3 19.2 19.0 17.2 11.8 10.6 9.1 20.4 19.0 19.3 16.7 19.0 19.3 Bharat Forge (BHAFOR) 410 535 Buy 32590 22.2 23.8 25.4 21.0 19.5 18.3 11.9 11.0 10.3 18.4 18.5 19.1 19.1 17.9 17.5 Bosch (MICO) 14225 15550 Reduce 43416 523.6 538.6 573.1 32.5 31.6 29.7 23.3 22.0 20.5 17.5 15.9 15.0 25.8 23.5 22.3 Eicher Motors (EICMOT) 16577 15875 Hold 45189 808.1 821.9 903.2 20.2 19.9 18.1 14.3 13.6 11.7 32.5 27.7 26.1 24.8 20.8 19.4 Escorts (ESCORT) 468 430 Reduce 4157 54.6 47.3 53.4 8.5 9.8 8.6 5.1 4.9 4.2 21.6 18.0 18.0 15.6 12.3 12.3 Exide Industries (EXIIND) 176 205 Hold 14981 9.1 11.2 12.4 18.1 16.1 14.6 10.6 8.5 7.6 18.4 20.9 20.9 12.9 14.2 14.2 Hero Moto (HERHON) 2540 2200 Hold 50724 169.5 187.4 175.5 13.6 12.3 13.1 8.4 8.2 7.4 37.1 32.0 31.5 26.3 22.5 22.1 JK Tyre & Ind (JKIND) 56 60 Hold 1263 7.8 3.4 9.1 7.3 16.8 6.3 6.3 6.8 5.6 10.2 7.9 10.1 10.3 3.5 8.9 Mahindra & Mahindra (MAHMAH) 520 570 Hold 64646 38.6 44.4 31.8 13.5 11.7 16.4 9.1 8.5 8.6 17.3 14.7 13.2 14.1 11.7 9.6 Mahindra CIE (MAHAUT) 176 230 Buy 6647 13.2 14.1 17.1 14.8 13.8 11.4 7.8 7.8 6.4 12.4 11.1 11.9 13.2 12.6 14.2 Maruti Suzuki (MARUTI) 5773 5000 Reduce 174391 248.3 221.2 250.0 22.8 25.5 22.6 12.3 13.6 11.6 16.3 12.0 13.0 16.3 13.4 13.9 Motherson (MOTSUM) 105 100 Hold 33158 5.1 4.6 5.6 20.6 22.6 18.8 7.7 7.5 6.1 13.2 11.7 14.6 14.7 12.4 13.7 Tata Motors (TELCO) 120 160 Hold 50934 -84.6 9.3 21.4 -1.8 16.1 7.0 3.9 3.6 3.1 5.4 9.1 11.3 7.1 9.8 15.4 Wabco India (WABTVS) 6070 6510 Hold 11513 148.8 157.7 178.3 41.7 39.3 34.8 26.6 24.5 21.5 15.9 14.5 14.3 23.0 21.4 21.0

Source: Reuters, ICICI Direct Research

ICICI Securities | Retail Research 10 Result Update | Motherson Sumi ICICI Direct Research

RATING RATIONALE ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock

Buy: >15% Hold: -5% to 15%; Reduce: -15% to -5%; Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

ICICI Securities | Retail Research 11 Result Update | Motherson Sumi ICICI Direct Research

ANALYST CERTIFICATION

I/We, Shashank Kanodia, CFA, MBA (Capital Markets), and Jaimin Desai, CA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a SEBI registered Research Analyst with SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com

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Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

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Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

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ICICI Securities | Retail Research 12