Buy Samvardhana Motherson Ltd for the Target Rs 178 by Motilal Oswal Financial Services Ltd
Business resilience on display, yet again
* Samvardhana Motherson (SAMIL)’s 1QFY27 adjusted PAT at INR10.3b was above our estimate of INR9b, up ~70% YoY. EBITDA margin expanded 65bp YoY to 8.8% and was ahead of our estimate of 8.3%. Margin beat was driven by better-than-expected margin performance in the Wiring business (+25bp YoY to 11.1%) and Integrated Assemblies (+120bp YoY to 12.6%).
* We expect SAMIL to continue to outperform global automobile sales, fueled by rising premiumization and EV transition, a robust order backlog in autos and non-autos, and successful integration of recent acquisitions. Further, the current adverse global macro is likely to lead to industry consolidation, with players like SAMIL likely to emerge as key beneficiaries in the long run. Given the long-term growth opportunities, we reiterate our BUY rating on the stock with a revised TP of INR178, based on 24x FY28E EPS
Key highlights from the management commentary
* The company has concluded the acquisitions of Nexans Autoelectric and Yutaka Giken in Jul’26. Collectively, these two acquisitions are expected to contribute nearly USD2b of annualized revenue.
* It has also announced the acquisition of Shenzhen Autocruis (China), a manufacturer of advanced digital vision and monitoring systems for PVs and CVs. Their product portfolio includes Camera Monitoring Systems (CMS), Full Display Mirrors (FDM), 360-degree Around View Monitoring (AVM), Driver Monitoring Systems (DMS), and Dashcam Video Recording (DVR) solutions.
* FY27 capex guidance has been maintained at INR60b (+/-10%), reflecting the company's continued investment-led growth strategy.
* Total planned investment in the consumer electronics business stands at around INR75b. Of this, INR65b would be invested in the mother plant, to be deployed over the next three years, which would have a capacity of 42m units p.a. Onethird of this capex is done, while the balance capex will be incurred over the next two to three years.
* In 1QFY27, three new manufacturing plants were commissioned. Management expects a total of ten new facilities to become operational during FY27, further supporting future growth and capacity expansion.
* Effective net debt fell to ~INR97.5b (vs. INR112b YoY). The leverage ratio remained stable QoQ at a multi-quarter low of 0.8x.
Valuation and view
We expect SAMIL to continue to outperform global automobile sales, fueled by rising premiumization and EV transition, a robust order backlog in autos and nonautos, and successful integration of recent acquisitions. Further, the current adverse global macro is likely to lead to industry consolidation, with players like SAMIL likely to emerge as key beneficiaries in the long run. Given the long-term growth opportunities, we reiterate our BUY rating on the stock with a revised TP of INR178, based on 24x FY28E EPS.
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