Motilal Oswal Upgrades Samvardhana Motherson International to ‘Buy’ with a Target Price of Rs 218

Motilal Oswal has given a “Buy” rating to Samvardhana Motherson International with a target price of Rs 218. The company reported strong earnings growth of 65.5% year-on-year, despite a challenging quarter for automotive production. The company achieved an 18% return on capital employed (RoCE) in the first quarter, which is expected to improve further in FY25 due to benefits from recent acquisitions.

Revenue for the quarter grew by 28.5% year-on-year to Rs 288.7 billion, primarily driven by acquisitions. The company’s EBITDA rose 44% year-on-year to Rs 27.7 billion, and net profit increased by 65.5% to Rs 9.9 billion.

Samvardhana Motherson’s various business segments showed positive growth:

• The wiring harness business grew 9% year-on-year.
• The modules and polymer business saw a 27% increase in revenue.
• The vision system business grew 8% year-on-year.
• The emerging business segment grew 42% year-on-year.

However, net debt increased to Rs 133.7 billion, partly due to recent acquisitions and higher working capital needs.

Management expects global light vehicle production to stay flat or decline slightly in FY25, but the company is preparing to invest in new areas like consumer electronics. They anticipate continued improvements in RoCE and growth in their order book, which now stands at USD 83.9 billion.

Motilal Oswal remains positive about the company’s future, citing its diverse operations and strong order book. They maintain a “Buy” rating with a revised target price of Rs 218, based on earnings projections for June 2026.