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What’s Buzzing: Brokerages downgrade Motherson Sumi despite stellar Q4 performance, here’s why

Updated : June 03, 2021 10:15:30 IST

Motherson Sumi Systems was buzzing on Wednesday, June 2, and is expected to do so on Thursday too, on the back of the big positive in Q4FY21 earnings.

The reasons why the earnings were impressive are: 1) The company’s debt is down 40 percent in the last two years, 2) It has a strong orderbook of 15.6 billion euros, 3) Its overseas verticals, Samvardhana Motherson Peguform (SMP) and PKC, are showing strong improvements. In fact, SMP’s margins have improved, almost double year-on-year (YoY).

However, most brokerages have downgraded the stock because of steep valuations. The stock is now trading at 34 times FY22 and 28 times FY23, compared to a historic valuation of 20 times.

Therefore, a lot of the brokerages believe that the earnings are strong, but it is in the price. A point to note in this context is that the stock is up 70 percent in the last six months.

Watch the accompanying video of CNBC-TV18’s Sonia Shenoy for more details.
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