MOSL: MOTHERSON SUMI (Not Rated)-On track to attain Vision 2020-Beyond 2020, targeting areas like aerospace, defense and IT security

​MOTHERSON SUMI: On track to attain Vision 2020; Beyond 2020, targeting areas like aerospace, defence and IT security

(MSS IN, Mkt Cap USD11.2b, CMP INR345, Not Rated)

We attended MSS’s investors meet to update on Vision 2020 (Click here for the presentation made at the Meet). It is on track to attain its targets for FY20 of revenues of USD18b and RoCE of 40% driven by the acquisitions. Also, we got sneak peek into futuristic work done by Motherson Innovations (group’s innovation arm led by Mr L.V.Sehgal), as well as potential evolution of the group beyond 2020. Key highlights:

• MSS is on track to attain its FY20 target of revenues of USD18b and RoCE of 40%. While acquisitions will be key to attain revenue targets, it is very clear that M&A has to pass its 40% RoCE hurdle rate in 4-5 years. Also, it is progressing well on diversification based on 3CX15 (no component, customer and country >15% of sales).
  
• MSS has strong visibility of organic growth driven by good growth in premium segment as well as strong presence in upcoming new launches. Its strategy is fuel agnostic and it already supplies to 6 models of top-10 EV models.
  
• PKC would benefit from strong growth in China, off-road vehicles and rolling stocks. It see synergies from a) supply chain consolidation, b) vertical integration and c) efficiencies improvement.
  
• Rolling stocks wiring harness opportunity is ~USD2b. PKC’s key customers are Bombardier and Alstom (now Siemens as well post merger with Alstom). Rolling stock contributes ~10% of PKCs revenues and has order book of ~5x annual revenues.
  
• Shift to BS6 would increase value (by 20-50%) due to further increase complexity due to more sensors. Also, it would open up 2W segment for MSS as 2W shifts to electronic fuel injection systems with more sensors.