Target: ₹160
CMP:₹124.95
Samvardhana Motherson International’s (SAMIL) international organic business could remain under pressure in the near term. However, the ramp-up of its acquired businesses should drive the topline growth. Margin expansion, despite acquisitions, gives us comfort in its inorganic growth strategy. Additionally, we see the Consumer Electronics business having a $3b in revenue potential.
SAMIL’s revenue missed ours and BBGe (Bloomberg estimates) on weakness in Wiring Harness and Vision Systems. EBITDA margin expanded by c54bp y-y and beat BNPPEe and BBGe. EBITDA margin expansion was led by gross margin expansion which was offset by higher employee costs. PAT missed our estimates on higher finance costs and effective tax rates.
Demand trends are weak, and diversification is a tailwind. New model launch plans are delayed in the US and Europe; however, this is offset by growth in China. Despite weak global demand trends, SAMIL’s revenue can grow helped by its diversification strategy and ramp-up of its upcoming plants across businesses, in our view. Margins of SAMIL’s various acquisitions have also started expanding, driving higher EBITDA and PAT growth.
We cut our FY26-27E EPS and target multiples to factor in the slower demand environment. Our SOTP-based TP falls by 3 per cent. Maintain Outperform with revised TP of ₹160.
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