The weakness in euro has been a boon to the company as it makes European cars more desirable, said Chairman Vivek Chaand Sehgal.
We are very enthused with the numbers that are coming from our customer side and are looking at opening up more and more plants
Vivek Chaand Sehgal
Chairman
Samvardhana Motherson Group
UBS has initiated coverage on auto component maker Motherson Sumi and has set a target price of Rs 585 for a period of 12 months. Speaking to CNBC-TV18, Chairman Vivek Chaand Sehgal said the company is seeing a very strong traction in European market and is, therefore, expanding capacities there.
The weakness in euro has been a boon to the company as it makes European cars more desirable, said Sehgal.
Around 84 percent of Motherson's business comes from exports. The company has set extremely ambitious targets for next five years.
Below is the transcript of Vivek Chaand Sehgal's interview with Latha Venkatesh and Anuj Singhal on CNBC-TV18.
Latha: Outline the demand scenario for us, your key big markets India and Europe, the macro numbers don't look good but are you seeing your own demand falter, are you seeing it plateau or are you seeing it robust?
A: I think what is very important is that there is a bit of thinking that with the Europe being in trouble or something like that, we don't see anything like that.
We are seeing very strong traction, the whole of last year we have been saying that our numbers are looking good, demand is good, people are asking us for more and more, we are expanding our capacities, even now there is nothing like that in fact I think the weaker euro makes the European cars, which are so much in demand that are much more desirable so I think weaker euro is good for us.
Latha: Give us an idea of how much therefore revenues can grow if one assumes the euro remains at 1.05 to 1.10 (against dollar), which it hasn't done in 13 years, what kind of revenue growth are you expecting in euro?
A: In the last 10 days of our five year plan we have set some very ambitious targets which we will be opening up in the next annual report that comes out in May 2015.
Our compounded annual growth rate (CAGR) in the last six years is almost 40-45 percent and the organic growth and the inorganic growth - we would try and make those kinds of numbers still possible in the future.
We believe that organically with the new plants coming in within the next year or two years, you will easily see 20-25 percent coming on the organic side and on the inorganic side, we don't have any projection or something like that but anything can happen.
So we are very enthused with the numbers that are coming from our customer side and are looking at opening up more and more plants.
Motherson Sumi stock price
On March 20, 2015, at 14:14 hrs Motherson Sumi Systems was quoting at Rs 489.80, down Rs 8.05, or 1.62 percent. The 52-week high of the share was Rs 509.40 and the 52-week low was Rs 240.55.
The company's trailing 12-month (TTM) EPS was at Rs 6.59 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 74.32. The latest book value of the company is Rs 21.61 per share. At current value, the price-to-book value of the company is 22.67.
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