EUR 120.00 For Business Accounts Only

MOSL: Morning India (12/June/19): 1. Motherson Sumi (Challenges at SMP are transient; Scope of increase in content); 2. KNR Construction (Irrigation sprinkling a few opportunities); 3. Retail (Steady growth ahe

MOrning India (12/June/19): 1. Motherson Sumi (Challenges at SMP are transient; Scope of increase in content); 2. KNR Construction (Irrigation sprinkling a few opportunities); 3. Retail (Steady growth ahead); 4. Utilities (Lower LNG prices may power up gas-based plants)

 

Today’s top research idea

Motherson Sumi: Challenges at SMP transient; Content increase, value accretive M&A to drive growth

• Current issues at its SMRPBV subsidiary are transient in nature as MSS has taken corrective actions. We expect strong growth recovery in the said plants based on in-hand orders.
• MSS is not seeing any deferment of in-hand orders (EUR18.2b) due to weak demand environment. On the contrary, there is pressure from OEMs to pre-pone the projects.
• While orders worth EUR6.8b started production in FY19, ramp-up is not yet substantial. Large part of these new orders would be served from recently commissioned new plants. We see further scope to increase content, especially in EVs. Increase in content might also result in higher bought-out parts, hurting margins but profit per car and RoCEs should be substantially better.
• Value accretive acquisitions will continue to play an important part in MSS' growth strategy, as organic growth on high base would be limited. Also, any acquisition should give MSS access to customers, products and/or technology, as the organic route would have a very long gestation period.

Piping hot news

PV sales at new low, sector seeks govt. help

• In the steepest fall in nearly 18 years, the domestic passenger vehicle sales declined by 20.55% in May 2019, prompting the industry to seek government support. The decline in wholesale auto numbers continued mainly due to weak consumer demand, forcing manufacturers to undertake inventory correction.