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Motherson Sumi Systems Limited (MSSL),



Motherson Sumi Systems Limited (MSSL), the flagship company of the Samvardhana Motherson Group, was established in 1986. It is a joint venture between Samvardhana Motherson Group and Sumitomo Wiring Systems (Japan). The company is a leading global auto component player with presence across 25 countries. The acquisition of Visiocorp in 2009 and Peguform in 2011, has established MSSL as a global Tier-1 supplier to the major OEMs of the automotive industry. With a diverse global customer base comprising of almost all leading automobile manufacturers globally, MSSL is currently the largest auto ancillary in India and also ranked 55th in global auto component suppliers.

Valuation and view

MSSL’s performance remained healthy in Q4FY15 in terms of revenue as well as profitability. The company has recently acquired the wiring harness business of Stoneridge having a turnover of ~USD 300 mn from six manufacturing facilities in Americas and is in the process of acquiring Scherer & Trier. These are by far the largest acquisitions for the core business of wiring harnesses which will provide the company market recognition in North America & Europe and is expected to provide further headroom to growth. Meanwhile, the management has indicated of improving its return on capital employed (ROCE) to 40% on consolidated basis by FY20.


Considering the above aspects, we rate the stock as ‘BUY’ at the CMP of Rs 478.3, attractively placed at EV/EBITDA of ~12.6x and ~9.9x, for FY16E and FY17E, respectively to arrive at a target price of Rs 575, with a potential upside of ~17% for the coming 12 months.

Gilt’s a Hit Beats the Sensex,

In anticipation of further rates cut, sharp drop in inflation, a stable rupee and oil as well commodity prices cooling off the gilt funds have excelled and outperformed the sensex during the past year. The gilt funds usually invest in medium to the long term government bonds and thereby makes the most during the bond rally when the prices of the underlying asset rises.

The gilt funds have done well since the past six months so as to make the investor especially the HNIs go merrily home bagging returns of 5.73% and on the other hand the sensex wilting by 1.7% . The gilt funds witnessed an avalanche of inflows to the tune of Rs7, 712 Crores during the financial year where the sensex was trailing at 14.7% and the gilt funds marching ahead at 15.2% and during the last financial year the outflow of these funds were Rs1, 868 crores.

With the rates cut around the next corner and the retail inflation tanking from 8.31% to 4.87% the gilt funds are expected to deliver a minimum of 10% returns this year even equities are expected to deliver higher returns but gilt will be the winner amongst the two especially at the commencement of the interest rate cycle but after a period of three year or so the equities tend to outperform the gilt funds.


So after the sharp correction in the equity markets which have removed the excess of the froth so the lower inflation, rates cut and wave of positive news will swing the sentiments will eventually revive and boost the corporate earnings in the coming times.

Indian Pharma Market

India is among the top six global pharmaceutical producers in the world. Indian vaccines are exported to 150 countries. India produces 40-70 per cent of the WHO demand for DPT & BCG and 90 per cent of measles vaccine. Approximately 70 per cent of the patients in developing countries receive Indian medicines through NGOs like The Clinton Foundation, Bill & Melinda Gates Foundation, Doctors Without Borders, the UNCTAD etc.Presently there are 10,500 manufacturing units and over 3,000 pharma companies in India, growing at an exceptional rate. India has about 1,400 WHO GMP approved manufacturing units. India has been accredited with approximately 1,105 CEPs, more than 950 TGA approvals and 584 sites approved by the USFDA. Globally more than 90 per cent of formulations approvals for Anti-retroviral (ARVs), Anti-tubercular & Anti-malarial (WHO pre-qualified) have been granted to India.Manufacturing costs in India are approximately 35-40 per cent of those in the US due to low installation and manufacturing costs. India ranks amongst the top global generic formulation exporters in volume terms. India’s pharma exports stood at US$ 15 billion in 2013-14.

India exports all forms of pharmaceuticals from APIs to formulations, both in modern medicine and traditional Indian medicines.The country’s pharmaceutical industry accounts for about 1.4 per cent of the global pharmaceutical industry in value terms and 10 per cent in volume terms. The Government of India has announced a host of measures to create a facilitating environment for the Indian pharmaceutical industry. The policies of the Government of India are aimed at building more hospitals, boosting local access to healthcare, improving the quality of pharmaceuticals and improving the quality of medical training. The Government of India is committed to setting up robust healthcare and delivery mechanisms.India’s pharma sales are expected to reach US$ 27 billion by 2016. India is well placed to become one of the major drivers in providing healthcare to all while controlling the ever-increasing healthcare spend of both developed and developing nations.

Glenmark, Torrent, Sanofi, Dr Reddy’s and Cipla grew in excess of 25% Glenmark reported highest growth in April at 30.1% while 4Q growth stood at 24% YoY on improved traction across therapies.

Torrent (28.7% YoY), Sanofi (25.8% YoY), Dr. Reddy’s Lab (25.8% YoY) and Cipla (25.1%) also outperformed the IPM growth in April (4Q growth was also in excess of 20% YoY). Post Sun+Ranbaxy merger, the combined entity (Sun) sales grew 18% YoY in April and 12.6% in 4Q. Sun Pharma on standalone basis grew 27% YoY while Ranbaxy portfolio grew 6% YoY.

Most of the therapies grew in double digits in April 2015 Gastro-Intestinal (21% YoY), Anti-Diabetic (25% YoY) and Derma (22% YoY) grew in excess of 20% in April. In Derma, growth for Betnovate C, Candid, Lobate GM brands were higher at 89.5% YoY, 43.3% and 41.7% respectively. Spasmo Proxyvon Plus, a leading brand in Gastro therapy in India, grew 113% YoY in April and MAT growth stood at 100% YoY. Other therapies which registered double digit growth in April include - Respiratory (17.8% YoY), Cardiac (16% YoY), Pain/Analgesic (16% YoY) and Neuro/CNS (15.5% YoY).