MSS reiterated its FY25 target of US$ 36 bn revenues (FY20-25 CAGR 29%) at 40% ROCE (FY16-20 avg 17%). MSS sees strong organic and inorganic growth in autos with geographical and customer expansion, and rising content per vehicle. FY25 target includes 25% revenues from aerospace, medical, IT & logistics. MSS has big growth ambitions although value creation will depend on inorganic opportunities and investment needs where visibility is low. We retain Hold.
Big growth plan. MSS, at the investor meet, reiterated its FY25 revenue target of US $36bn at 40% ROCE. This, if achieved, would be 29% revenue CAGR over FY20-25 and a big expansion in ROCE from FY16-20 average of 17%. MSS remains focused on diversification and aims no country, customer or component to form more than 10% of revenues by FY25. Dividend payout target remains at 40% of consolidated net profit.
MSS sees strong organic and inorganic growth in autos, MSS is targeting its auto revenues to rise to US$27 bn by FY25 (FY20-25 CAGR: 22%) driven by organic as well as inorganic growth. Industry premiumisation and rising content per vehicle provide a favourable backdrop. Key segmental growth drivers include —Wiring Harness, Expansion in 2Ws, CVs and rolling stock, higher content in EVs, and customer expansion in US; Mirrors, Entry into new markets (Japan, South Africa, Russia, and Turkey), increased presence with local OEMs in China, demand shift from sedans to SUVs and new products, Polymers, Expansion in US, China, and Eastern Europe, and Lighting and electronics, Rising LED penetration, exports and overseas markets.
25% of FY25 revenues from non-auto verticals: MSS is diversifying into nonauto businesses and will focus on four segments: aerospace, medical, IT and logistics. Key focus area in aerospace include aero-structure, landing & engine parts, wiring harnesses and cabin parts. MSS will start a new aerospace facility in April 2021 and is evaluating potential acquisitions. In medical, MSS plans to launch point-of-care technologies, grow contract manufacturing and inorganically build large global tech platform. IT and logistics have been identified as other growth areas.These new nonauto verticals are expected to contribute US$9bn, 25% of the FY25 revenue target