Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Samvardhana Motherson International Ltd / Equity Bottom-Up

We had previously mentioned that <a href="https://www.smartkarma.com/entities/10662" target="_blank" data-smartkarma-citation="entities:10662:1">Motherson Sumi Systems Ltd (MSS IN)</a> is on the lookout for further acquisitions, and that the company expects inorganic growth to account for at least 35% of its total FY2020E revenue target.  We also mentioned that, after PKC, the company is considering almost 30 deals, out of which four looked promising to them. On December 18th, 2017, Motherson stated on a report to Economic Times India that it is to announce two new acquisitions soon.  As such, we have been working on this insight, which details the potential acquisition targets for Motherson.  <blockquote>“I am going to give the go-ahead for two new acquisitions. We have a list of companies and have hired one of the big four consultancies to help us. We have finalised an agreement with one of the target companies,” said Mr. Seghal. </blockquote>The company also stated to the Nikkei that significant opportunities lie in the US and Europe while acquiring a Japanese company is almost impossible due to their highly competitive nature. Furthermore, Motherson has acquired 19 companies since 2002, most of them being in the US and Europe. These acquisitions also include a decent number of private companies acquired mostly via asset purchase.  Thus, we have put forward our list based on these factors, including some large companies and a few small companies. However, as mentioned it should be noted that the company may also acquire private companies who might prove to be key growth drivers for their business.  Moreover, we also looked into product mix (making sure the companies selected had a presence in the automotive and industrial markets) and geographical coverage. We also carried out an analysis on the financial benefits that may accrue to Motherson if they go ahead with acquiring either of the listed companies. When combined, certain acquisitions brought down Mothersons’ profitability as these companies’ margins were lower when compared to others. However, we believe that Motherson can still go about turning around these companies’ performance post-acquisition as it has done in the past.

We had previously mentioned that Motherson Sumi Systems Ltd (MSS IN) is on the lookout for further acquisitions, and that the company expects inorganic growth to account for at least 35% of its total FY2020E revenue target.  We also mentioned that, after PKC, the company is considering almost 30 deals, out of which four looked promising to them. On December 18th, 2017, Motherson stated on a report to Economic Times India that it is to announce two new acquisitions soon.  As such, we have been working on this insight, which details the potential acquisition targets for Motherson.  “I am going to give the go-ahead for two new acquisitions. We have a list of companies and have hired one of the big four consultancies to help us. We have finalised an agreement with one of the target companies,” said Mr. Seghal. The company also stated to the Nikkei that significant opportunities lie in the US and Europe while acquiring a Japanese company is almost impossible due to their highly competitive nature. Furthermore, Motherson has acquired 19 companies since 2002, most of them being in the US and Europe. These acquisitions also include a decent number of private companies acquired mostly via asset purchase.  Thus, we have put forward our list based on these factors, including some large companies and a few small companies. However, as mentioned it should be noted that the company may also acquire private companies who might prove to be key growth drivers for their business.  Moreover, we also looked into product mix (making sure the companies selected had a presence in the automotive and industrial markets) and geographical coverage. We also carried out an analysis on the financial benefits that may accrue to Motherson if they go ahead with acquiring either of the listed companies. When combined, certain acquisitions brought down Mothersons’ profitability as these companies’ margins were lower when compared to others. However, we believe that Motherson can still go about turning around these companies’ performance post-acquisition as it has done in the past.

Two More Acquisitions on the Way for Motherson Sumi

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul><li>Motrex is auto parts company which is expected to complete its IPO in July. </li><li>Motrex specializes in navigation, audio system, and various in-vehicle infotainment (IVI) products. Motrex has been an innovator in the port installed option (PIO) market related to the vehicle navigation system. Major competitors to Motrex include <a href="https://www.smartkarma.com/entities/6089" target="_blank" data-smartkarma-citation="entities:6089:1">Hyundai Mobis Co Ltd (012330 KS)</a> and <a href="https://www.smartkarma.com/entities/8814" target="_blank" data-smartkarma-citation="entities:8814:1">LG Electronics Inc (066570 KS)</a> in supplying in-vehicle infotainment (IVI) products. </li><li>Exports represented 93.5% of its total revenue and domestic sales represented the remaining 6.5% of revenue in 2016. The company's sales increased 19.2% CAGR from 2013 to 2016. The company's operating margin averaged 11.5% in 2013 to 2016. </li><li>Vehicle infotainment products are likely to benefit from the growth of autonomous and connected vehicles, as some consumers are willing to pay extra for vehicles that have more advanced IVI features in the connected and autonomous vehicles. Motrex has been able to increase market share of the AV/AVN products sold to Hyundai Motors and Kia Motor in the past several years, increasing from 6.1% in 2014 to 9.5% in 2015, and 13.8% in 2016. </li></ul>

Motrex is auto parts company which is expected to complete its IPO in July. Motrex specializes in navigation, audio system, and various in-vehicle infotainment (IVI) products. Motrex has been an innovator in the port installed option (PIO) market related to the vehicle navigation system. Major competitors to Motrex include Hyundai Mobis Co Ltd (012330 KS) and LG Electronics Inc (066570 KS) in supplying in-vehicle infotainment (IVI) products. Exports represented 93.5% of its total revenue and domestic sales represented the remaining 6.5% of revenue in 2016. The company's sales increased 19.2% CAGR from 2013 to 2016. The company's operating margin averaged 11.5% in 2013 to 2016. Vehicle infotainment products are likely to benefit from the growth of autonomous and connected vehicles, as some consumers are willing to pay extra for vehicles that have more advanced IVI features in the connected and autonomous vehicles. Motrex has been able to increase market share of the AV/AVN products sold to Hyundai Motors and Kia Motor in the past several years, increasing from 6.1% in 2014 to 9.5% in 2015, and 13.8% in 2016. 

South Korea

Yura Tech Co., Ltd. designs, manufactures, and markets automotive parts. The Company's products include spark plugs, glow plugs, cigar coils, plug cables, and ignition coils.

Yura Tech (048430 KS)

Two More Acquisitions on the Way for Motherson Sumi

We had previously mentioned that Motherson Sumi Systems Ltd (MSS IN) is on the lookout for further acquisitions, and that the company expects...

Aqila Ali

Motrex IPO Preview (Part 1)

Motrex is auto parts company which is expected to complete its IPO in July. Motrex specializes in navigation, audio system, and various...

Douglas Kim