Shares of Motherson Sumi Wiring edged higher on Wednesday (November 1) a day after the automobile ancillary major reported in-line September quarter earnings, leaving analysts hopeful of improved margins and a bullish outlook on the stock. The Motherson Sumi Wiring stock opened over 1% higher in today’s (November 1) morning deals but pared earlier gains to settle 1.42% lower at ₹59.10 on the NSE.

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The auto ancillary firm's net profit surged 34% year-on-year, driven by healthy operating performance. Its revenue also rose by 15% year-on-year.

In an interaction with CNBC-TV18 on Wednesday Anurag Gahlot, COO, Motherson Sumi Wiring, said the company's sales have been driven by its customers, with the onset of the festive season coinciding with the Q2, leading to higher volumes.

"So, we are very much aligned with the customer. As our customers are forecasting schedules in a positive way, I think we will have good quarters coming up," Gahlot said. "It all depends on the customer.”

On margins, he said many will talk about the margins, which is understandable. However, he added, "Also, we work with a customer in very close vicinity and try to look at opportunities that can benefit both of us. On the other side, we also work on our internal operating efficiencies."

Analysts expect a gradual recovery in the operating performance starting from the second half of FY24, primarily on account of increased production and utilisation of the new plants.

Motherson Sumi Wiring's earnings before interest, tax, depreciation and amortisation (EBITDA) increased 33% YoY to ₹253 crore. Its EBITDA margin, however, shrank to 11.8% due to lower gross margins and gradual ramp-up in new orders, where operational efficiencies are still being established.

Analysts at Motilal Oswal expect the margin to improve by 100 basis points (bps) over the next two quarters and reach close to FY22 levels, led by cost pass-through and ramp-up in new facilities.

Domestic brokerage Motilal Oswal has reiterated its 'buy' rating on Motherson Sumi Wiring stock with a target price of ₹70 per share. "We believe it deserves rich valuations, driven by a) its strong competitive positioning, b) top decile capital efficiencies, and c) it being a beneficiary of EVs and other mega trends in Autos," it said in its report.

(Edited by : Shoma Bhattacharjee)

First Published:Nov 1, 2023 6:06 PM IST