Target: ₹80
CMP: ₹62.4
Market leader in the India wiring harness industry: Motherson Sumi Wiring India (MSUMI), a JV between Sumitomo Wiring System (SWS) and Motherson Group, is a market leader in the Indian wiring harness industry with a market share of over 40 per cent.
The wiring harness business is unique from the perspective of high human capital intensity and lower capex requirement.
MSUMI enjoys superior profitability led by improved efficiency and economies of scale, as reflected in the industry leading gross/EBITDA/ EBIT margins.
After the restructuring of Motherson Sumi Systems (MSS), MSUMI transformed into an India-based pure play wiring harness player with a focus on the domestic market. It derives over 95 per cent of its revenue from the domestic business with negligible exposure to exports.
We believe MSUMI deserves rich valuations due to its: strong competitive positioning; top-decile capital efficiency; and position as a prime beneficiary of EVs and other megatrends in Autos.
Our target P/E of 35x is in line with the other auto component companies, which enjoy similar competitive positioning, growth potential and superior capital efficiency.