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Decent Qtr; Consumer Electronics/Aerospace to pick pace

In 2QFY25, SAMIL reported consol. EBITDA margin improvement of 80bps YoY to c.8.8%. Demand environment for light vehicles (LV) remains muted. Premiumisation and hybridisation continues to drive content per vehicle growth owing to SAMIL’s powertrain-agnostic product portfolio. Recent acquisitions have started reflecting favourably on overall performance. The company indicated of a healthy acquisition pipeline going forward. Non-automotive business (led by Consumer Electronics and Aerospace) is also expected to pick pace going forward. Net debt / EBITDA (1.0x) stands at comfortable level. We believe the company with its global presence, an expanding product portfolio and a wide customer base presents a multi-year growth opportunity. We expect revenue/EPS CAGR of 16%/35% over FY24-27E. Stock trades at an attractive ~16x FY27e EPS. We maintain BUY rating with a Mar’26 TP of INR 210 (20x FY27e EPS). Recovery in global LV demand remains a key monitorable.

* 2QFY25 – Margin below JMFe: SAMIL reported consol. net sales of INR 278.1bn (+19% YoY, -4% QoQ), 3% below JMFe. EBITDA stood at INR 24.5bn (+30%YoY, -12% QoQ), 13% below JMFe. Reported EBITDA margin stood at 8.8% (+80bps YoY & -80bps QoQ), 90bps below JMFe. Margin for Wiring Harness, Modules & Polymer, Vision Systems, Integrated Assemblies, Emerging businesses improved YoY by +60bps / +30bps / +10bps / +170bps / +90bps to 11.2% / 7.4% / 9.2% / 11.9% / 13.3%. Consol. adj. PAT for 2Q was INR 8.8bn (+62% YoY, -12% QoQ) vs. JMFe of ~INR 9.3bn.

* Demand and margin outlook: Global light vehicle (LV) sales declined 5% YoY at 21.4mn units during 2Q. While LV vols. in India remained flat, EU / NA / China witnessed a YoY decline of 7% / 6% / 4% due to lower than anticipated demand for EV platforms and delay in new launches. Strong growth in Hybrids and steady momentum of SUVs (partially offset by EV slowdown) continues to benefit SAMIL favourably from content growth perspective. The company indicated that it has a total booked business of USD 87.7bn (+USD 3.8bn over Mar’24) in the automotive segment. Of this, 24% is from EVs. The company remains well-positioned owing to its powertrain agnostic product portfolio (witnessing extension in life for ICE programs/platform across EU and NA). In respect of margins - 80bps YoY margin improvement during 2Q was led by favourable business mix and better cost efficiencies. Company indicated that while copper prices softened in 2Q, the prices have started to increase in 3Q. The company also indicated of upfronting of inflationary costs during 1H and expects pass-through to OEM to reflect during 2H.

* Update on acquisitions: Inorganic revenue / EBITDA for 2QFY25 stood at INR c.62bn / INR 5.9bn (EBITDA margin at 9.5%). Sequential drop in EBITDA margins (-150bps QoQ) was owing to seasonality, summer shutdown in EU, and erratic EV production schedule. SAMIL completed all the acquisitions announced so far (integration underway) and indicated of healthy acquisition pipeline.

* Non-automotive segment: Currently non-automotive business is operating at a revenue run-rate of INR 30bn p.a. With respect to consumer electronic business (JV with BIEL Crystal), 1 st batch of products were delivered with mass production starting in Nov’24. Further, SAMIL indicated of strong order book for its Aerospace business and expects robust growth going ahead (integration of AD industries is on track).

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