Samvardhana Motherson's Growth To Double In Three Years, CLSA Says Reaffirming Outperform Rating

Samvardhana Motherson International Ltd.'s growth may double in the next three years, CLSA said, adding the original equipment manufacturer has been delivering steady execution in adverse market conditions. The estimate is build on the 2.5 times asset turnover and 3.5% profit after tax margin.

The brokerage maintained 'outperform' rating on the stock with a target price of Rs 167 apiece, which implied a 23.77% upside from Wednesday's closing price.

As the tariff issue settles in the next six-to-nine months, the Electronics Manufacturing Services' business execution visibility will improve. Samvardhana Motherson International would start seeing reversal in valuation multiples, CLSA said.

CLSA is estimating 11% compound annual growth rate for financial years 2025 and 2027. The FY27 revenue will be at $16 billion and Ebitda margin assumption at 9.5%. A mix of sports utility vehicles and electric vehicles are driving organic growth of the auto OEM maker, above the global passenger vehicle industry growth, CLSA said.

CLSA expects Samvardhana Motherson International to deploy $1.5 billion for merger and acquisition. M&A activities got delayed after the fundraise in the second half of the calendar year 2024 because of the tariff deployment uncertainty in the US.

Samvardhana Motherson International share price declined 7.56% to Rs 124.73 apiece, the lowest level since March 18. It pared losses to trade 2.48% down at Rs 131.59 apiece as of 10:19 a.m., as compared to 0.46% advance in the NSE Nifty 50 index.

The stock rose 12.18% in 12 months, and declined 15.53% on year to date basis. Total traded volume so far in the day stood at 4.2 times its 30-day average. Relative strength index was at 53.33.

Out of 25 analysts tracking the company, 21 maintain a 'buy' rating, two recommend a 'hold,' and two suggest 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 21.5%.