Samvardhana Motherson (SMRPBV), a subsidiary of automobile component manufacturer Motherson Sumi Systems, has entered into a partnership with the Plast Met Group (Turkey) through its subsidiary Samvardhana Motherson Reflectec (SMR). According to the agreement, SMR will acquire 75 percent shareholding in two companies, Plast Met Kalip, Istanbul and Plast Met Plastik, Bursa.

Analysts expect the deal to be EPS accretive for Motherson Sumi Systems. The two Plast Met companies reported combined revenue of euro 33 million and euro 28 million in 2019/2020, respectively.

Plast Met group, engaged in manufacturing of injection moulded parts, sub-assemblies for mirrors, trim modules and lighting systems.

The base enterprise value (EV) of around euro 21.8 million will be used to determine the equity value of Plast Met companies and the final purchase price will be 75 percent of the equity value determined at closing.

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Plast Met has been a preferred automotive supplier in Turkey with more than 30 years of experience in the market. It produces injection moulded parts and subassemblies for mirrors, trim modules and lighting parts. It has a state-of-art tool room which produces injection moulding tools for global automotive customers for their plants in Turkey as well as plants located in other parts of the world.

"The acquisition will provide Motherson group access to Turkey market, become 42nd new country for MSS (aiding 3CX10). Turkey has an annual production of 1.4 million units, strong local market presence will act as an added advantage in scaling up its low-cost manufacturing," ICICI Securities said in a report.

This location will not only act as a vital sourcing hub for SMR and aid further vertical integration but also reduce the turnaround time for design/ development and delivery to its key European customers, it added.

SMR has not had an acquisition in the recent past and this will provide a diversification opportunity aligned with its core competencies and competitive capacity expansion opportunity for its growth in the Euro region. Few of SMR’s key global competitors also have sourcing partnerships in Turkey, the brokerage firm noted.

"We believe this partnership provides SMR with a) new growth opportunity, b) more competitive cost dynamics, c) enhance value proposition for OEM’s. We value Motherson Sumi Systems on SoTP basis and value India (Ex-DWH/DWH) at 23x/25x respectively while maintaining multiple for international subsidiaries at 14x Dec ’22E EPS," ICICI Securities said.

It maintained a Buy rating on the stock with an unchanged target price of Rs 187 per share.

First Published:Jan 19, 2021 4:23 PM IST