The share price of Motherson Sumi Systems fell over 5 percent on Thursday after a 13 percent rise in the stock in the previous session as brokerages downgraded the stock after the company announced its March quarter earnings.
The stock fell as much as 5.6 percent to its day's low of Rs 254 per share on the BSE.
The rise in Wednesday's session came after the company announced its quarterly results showing a robust recovery. The company reported a nearly eight-fold jump in consolidated net profit at Rs 1,018.69 crore in the fourth quarter ended March 31 riding on strong sales. It had posted a consolidated net profit of Rs 135.66 crore in the same quarter previous year.
Consolidated total revenue from operations during the period under review stood at Rs 16,971.91 crore as against Rs 14,434.48 crore in the year-ago quarter, it said.
The company said its consolidated revenues in the fourth quarter of the financial year 2020-21 were more than pre-COVID levels as industrial activity picked up globally and despite multiple headwinds such as chip shortage, higher commodity costs, it has sustained profitability.
However, despite a stellar performance, global brokerage houses Nomura, CLSA and Jefferies downgraded the stock as they don't see a significant upside in the near term.
Nomura downgraded the stock to 'neutral' with a target at Rs 301 per share. As per the brokerage, the steady performance is likely to continue for the stock but near-term catalysts are played out.
However, long-term is still positive, said Nomura. "Motherson Sumi’s profitability will continue to rise further as electric vehicles will likely gain share," it added.
CLSA downgraded the stock to 'outperform' with a target at Rs 290 per share. It said that current valuations limit upside potential. However, the brokerage is constructive on medium-term revenue and margin trajectory. It raised FY22/23 EPS estimates by 2-3 percent.
Jefferies downgraded the stock to 'underperform' with a target at Rs 205 per share. "Motherson Sumi’s Q4 EBITDA was 9 percent below estimates," said Jefferies, adding that its operational outlook is good with expectations of cyclical recovery.
Goldman Sachs, however, maintained a 'buy' call on the stock with a target at Rs 236 per share. "Operationally, the company's Q4 numbers remained below estimates but it beat expectations on order wins and cash flow generation," GS said.
For the financial year ended March 31, consolidated net profit was at Rs 1,569.37 crore as compared to Rs 1,294.44 crore in the previous year. However, consolidated total revenue from operations was lower at Rs 57,369.91 crore as against Rs 60,728.99 crore in 2019-20.
Under its Vision 2025 targets, the firm is aiming at $36 billion revenues in 2024-25 with 40 percent return on capital employed at a consolidated level.