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ICICI Securities Report
Samvardhana Motherson International's (SAMIL) Q4FY23 EBITDA margin at 9% is up 120bps QoQ, and is higher than the consensus estimate of 8.1%. This was driven by gradual recovery in the gross margin (GM), operating leverage benefits and partial cost pass-through to customers. SAMIL reported its all-time-high quarterly revenue at Rs225bn with volume improvement in EU, North America and India outpacing China volume decline. With continued focus on EV solutions, EVs now account for 39% of SAMIL's orderbook vs 27% at FY22-end. Revenue growth of ~31% was driven by ~20- 25% growth in EUR-denominated revenue, favourable EUR/INR move and inorganic revenue addition.
EBITDAM improvement of ~200bps YoY to 9% was driven entirely by GM improvement as fixed costs remained elevated due to wage and power cost inflation. Management expects capex for FY24 to be higher at ~Rs30bn (vs ~Rs22bn in FY23) – to support growth mainly in India market with 6 new facilities and other emerging businesses.
With easing chip supply situation, input costs cooling off, and gradual cost pass-through we expect SAMIL's EBITDA to register a CAGR of 19% for the period FY23-FY25E. Maintain BUY on the stock with a revised DCF-based target price of Rs95 (earlier: Rs110), implying 19x FY25E earnings. The cut in target price results from factoring-in of the higher capex outgo and slight moderation in our growth estimates.
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