With significant correction in Indian stock markets over the last few months, many long term stocks to buy are available at good valuations. For investors looking for value the auto ancillary sector offers many long term stocks to buy.
While the sector may be facing a slump right now, experts believe it is not yet time to write it down.
Let’s take a look at the best long term stocks to buy from the auto sector in India first.
Motherson Sumi Sytems Ltd. is one of the most promising companies in the auto ancillary sector. It is one of the world's top specialized auto component manufacturing companies for Original Equipment Manufacturers (OEMs). With a varied global customer base Motherson Sumi Systems caters to leading auto makers in 36 countries across six continents. Motherson Sumi Systems offers a diverse range of auto components such as wiring harnesses, moulded plastic parts including car exterior and interior parts, rear view mirrors, bumpers, dashboards and door trims, rubber components and HVAC systems.
From a 52 week high of Rs.196.67 on 21st Sep 2018, the stock is currently trading at around Rs.102-104 levels. At 90% fall in stock prices, Motherson Sumi Systems is currently trading at a very attractive valuation.
Before we proceed further to understand what makes Motherson Sumi Systems an attractive buy at current levels, let’s take a look at the reasons due to which the stock has corrected so much.
Slowdown in the domestic and global auto industry
Sales in the domestic passenger vehicle industry has fallen drastically due to many challenges such as increase in the total cost of ownership due to mandatory three year insurance purchase increased safety norms in vehicles and high cost of retail finance. All these has forced automobile manufacturers to cut production thereby impacting auto ancillary companies adversely Motherson Sumi Systems. The global slowdown in auto industry has affected PKC Group, a subsidiary of Motherson Sumi Systems which manufactures wiring harness for commercial vehicles such heavy trucks.
Reasons why Motherson Sumi Systems should be considered among long term stocks to buy in India
Upgrade of automotive standards to BS VI emission norms in India
Implementation of BS VI emission norms means a key trigger for Motherson Sumi Systems as the new norms would lead to complexity in wiring harness. This would result in increased content per vehicle, provided by Motherson Sumi Systems.
Focus on electric vehicles (EV)
Not only in India, but world over countries are making conscious effort to gradually move over to electric vehicles with an aim to curb pollution and cut down on import bills on fossil fuels. As electric vehicles require more wiring component this would increase the content per vehicle provided by Motherson Sumi Systems by anywhere between 20-30 percent. Besides the shift to electric vehicles means, the demand for company’s other products such as polymer and mirror-based products would still continue.
To summarize Motherson Sumi Systems definitely looks like a winning stock which you can consider while looking for long term stocks to buy in India.