Motherson Sumi Wiring To Go Ex-Bonus — What Should Investors Do?

Motherson Sumi Wiring investors will get two shares for every five they hold.

<div class="paragraphs"><p>A staff member at Motherson Sumi Systems' wiring division. (Photo: Company website)</p></div>
A staff member at Motherson Sumi Systems' wiring division. (Photo: Company website)

Motherson Sumi Wiring India Ltd. had announced a bonus issue recently. If you buy before Nov. 16, which is the ex-bonus date, you will be eligible for bonus shares. If you purchase the shares on ex-bonus date, then they won't be credited to your account on record date as the settlement takes two days (T+2).

The company had announced Nov. 17 as the 'record date' for the bonus issue in the ratio of 2:5; which means shareholders will get two shares for every five they hold. Bonus shares will be issued from the retained earnings, which stood at Rs 404.5 crore as on March 31.

The company has a joint venture with Japan's Sumitomo Wiring Systems Ltd. and is a market leader in wiring harnesses, harness components, and other electric wires. The company has 45-50% share in the domestic market.

Motherson Sumi Wiring was formed when the domestic wiring harness business was spun off from Motherson Sumi Systems Ltd. with effect from Jan. 5. Since listing, the stock is up 29% and is up 48% from its 52-week low.

ICICI Securities and Motilal Oswal have a positive view on the stock:

ICICI Securities 

  • Has a 'buy' rating and a target price of Rs 100, implying a multiple of 30 times its estimated earnings for FY25, and a potential upside of about 20% from the current market price.

  • Premiumisation of passenger vehicles, electrification and rising complexity of PVs are set to result in the rising value of wiring harnesses used

  • The company generates about 60% of revenue from passenger vehicles, with remaining 40% split among two-wheelers, commercial vehicles and off-road categories.

  • Electrification would result in twofold value addition for wireless harnesses/vehicle, aiding growth potential.

  • Expects MSWIL to operate at about 50%+ RoCE.

Motilal Oswal 

  • Has a 'buy' rating with target price of Rs 105, implying a multiple of about 35x December 2024 EPS.

  • Deserves rich valuations due to its strong competitive positioning, top decile capital efficiencies, and being a beneficiary of EVs and other mega trends in autos.