Samvardhana Motherson International (SAMIL), the main company of the Samvardhana Motherson Group, has seen huge success in the stock market this year, reaching new heights and setting records. This has brought big returns for shareholders. So far in 2024, the company’s shares have risen from ₹103 to ₹212.85, giving a massive 106% gain. This is the strongest performance for the stock since 2014, when it saw a 150% increase.
At present, Samvardhana Motherson is the second-best performing stock in the Nifty Next 50 index. After going through a rough patch from February 2022 to March 2023, during which the stock lost 45% of its value due to global supply chain issues, the stock bounced back in April 2023. Since then, it has gained an impressive 217%.
About Samvardhana Motherson
Samvardhana Motherson is a global engineering and manufacturing company that provides solutions to Original Equipment Manufacturers (OEMs). Over the years, it has expanded its services beyond the automotive industry to sectors like technology, healthcare, aerospace, and logistics. SAMIL is one of the top 15 automotive suppliers in the world and recently raised ₹6,437 crore through a qualified institutional placement.
The company is working on its sixth five-year plan, called Vision 2025. It has ambitious goals, aiming for revenues of $36 billion by March 2025 and targeting a 40% return on capital employed. Part of this plan is the “3CX10” strategy, which ensures no single country, customer, or product accounts for more than 10% of the company’s total revenue. This approach is meant to create a balanced and stable business model.
The company also plans to diversify its income streams. While 75% of its revenue will come from the automotive sector, 25% will come from other industries. The company has also committed to distributing up to 40% of its profits to shareholders as dividends.
In 2024, Samvardhana Motherson acquired two companies, AD Industries and Irillic, which focus on aerospace and healthcare. It also formed a partnership with BIEL Crystal in the consumer electronics sector. These moves are part of the company’s efforts to grow its non-automotive business. Since September 2022, the company has completed 16 strategic acquisitions, according to its FY24 annual report.
Strong Growth Expected in Q2FY25
Motilal Oswal, a domestic brokerage firm, predicts that Samvardhana Motherson will see a 22% increase in revenue year-on-year (YoY) in the second quarter of FY25. This growth will be driven by a strong order book and recent acquisitions. However, the firm expects the company’s EBITDA margin to drop by 20 basis points to 9.4%, due to seasonal factors.
Overall, Motilal Oswal expects the company’s earnings to increase by 2.1x YoY, mainly due to the contributions from its acquisitions. The firm has a ‘buy’ recommendation for the stock, with a target price of ₹240 per share.
Future Outlook
Analysts are optimistic about Samvardhana Motherson’s future, pointing to its strong management, strategic acquisitions, large order book, and growing market presence. The company’s order book stands at $84 billion as of March 2024, with electric vehicles (EVs) making up 23% of that.
Experts believe that the Indian auto component industry is set for long-term growth, supported by factors like global companies diversifying their supply chains and India becoming a key player in the global automotive market. Government policies like ‘Make in India’ and the rising demand for EVs further boost the industry’s prospects.
Disclaimer: The views and investment tips expressed by investment experts on Sharepriceindia.com are their own and not those of the website or its management. Sharepriceindia.com advises users to check with certified experts before taking any investment decisions.