Motherson Sumi share price: Stocks dip by 6% despite strong Q4 earnings; this is what Brokerages say

Despite strong quarter four results, the majority of brokerages are skeptical about Motherson Sumi Systems, as they post mixed sentiment towards the share price growth of the company. 

The auto component maker on Wednesday reported a four-fold jump in its profit of Rs 713.6 crore in the March-ended quarter of the financial year 2020-2021 as against Rs 183.4 crore year-on-year. While its revenue grew by 17.6 per cent to Rs 16,972 crores in Q4FY21 versus Rs 14,434.5 crores YoY. 

Meanwhile, the stock spurted 15 per cent intraday to Rs 273 per share touching its new life high on the BSE during Wednesday’s trade. The stock was trading with marginal gains at Rs 240 per share, however, immediately jumped to around nine per cent after its quarterly results were released. 

Operationally, Motherson’s numbers remained below estimate but the company beat expectations on order wins and cash flow generation, Goldman Sachs said while maintaining a Buy stance, reducing the target estimate to Rs 236 per share. Motherson Sumi on Wednesday closed at Rs 269 apiece. 

Similarly, CLSA also downgraded Motherson Sumi maintaining an Outperform stance but raises FY21 to FY23 EPS by two to three per cent respectively. It pointed out the company is constructive on mid-term revenue and margin trajectory; it sees current valuation limit upside potential. 

Motherson’s Q4 EBITDA 9 per cent below estimates, the operational outlook is good with expectations of cyclical recovery, Jefferies said while reducing the target to Rs 205 per share from current levels. It mentioned that the company’s margin contracted 30-150 bps quarter-on-quarter across the business. 

Maintaining a Neutral stance, Nomura believes Motherson Sumi’s profitability will continue to rise further as electric vehicles will likely gain share. The brokerage firm set a target of Rs 301 per share, adding further that the company’s near-term catalysts played out, long-term still positive. 

The shares of Motherson Sumi declined by around six per cent to Rs 253.15 per share at early trade today as compared to Rs 269.10 per share the previous close.