Global research firm CLSA is bullish on the shares of auto parts maker Motherson Sumi Systems, after the company reported strong earnings in the second quarter ended September-17. The company had reported a 21% rise in quarterly profit to Rs 4.36 billion from Rs 3.61 billion a year ago, Motherson Sumi Systems said in a company filing earlier this month. Notably, net sales outside India rose nearly 36% to Rs 115.66 billion. CLSA said that the company is likely to continue its long-term growth story.
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CLSA has a target of Rs 400 on the shares of Motherson Sumi Systems. The shares were trading at Rs 351.1 up by more than 1.4% on Monday morning at NSE. CLSA’s target price implies an upside of more than 12% from the current market prices. The shares have risen by more than 59% in the year so far. Notably, the scrips have corrected by more than 3% in the last one month alone. The Sensex is up by more than 26.5% since January in the year, while the BSE Auto Index has returned 25% in the same period.
On Friday, another global research and brokerage firm UBS maintained buy rating on stock with increase in target price of Rs 405 from Rs 370 per share. The brokerage house sees strong earnings growth trajectory over next three years. The ramp up of new facilities and continued margin expansion in international business are the positives.
CLSA joined the bandwagon of global research firms cheering India’s structural reforms, and says that the benefits of GST are moderately visible through early signs. In its latest India strategy note, the global firm noted, “After the implementation of goods and services tax (GST) from July 1, companies highlighted the shift from the unorganised space to the organised space within their industry.” The research house said that investors like government’s pro-growth stance in public sector banks’ recapitalisation plan of Rs 2.11 lakh crore and are positive on mild fiscal relaxation through tax cuts. “Investors are turning positive in India, as they believe that the worst is over in terms of poor corporate earnings,” CLSA said.