Samvardhana Motherson share price slips 4% as Citi recommends 'sell'

SAMIL shares have rallied in excess of 82 percent since the start of the year.

Shares of Samvardhana Motherson International (SAMIL) slipped 4 percent to Rs 182 in morning trade on September 13 after analysts at Citi recommended a bearish 'sell' call on the counter and a price target way below its current price.

With a price target of Rs 105, the international brokerage firm implies a massive downside of 44.4 percent from the last close of Rs 189 on the National Stock Exchange. The brokerage notes that recent trends in auto volumes across key global markets have been weak, with OEMs, particularly in Europe, lowering their volume guidance.

Follow our LIVE blog for all the latest market updates

Continued news of demand weakness could weigh on the stock’s performance in the near term, and a build-up of inventory could add to the pressure. The company's balance sheet is also under strain due to net debt of Rs 16,000 crore (including leases). If funds are raised through equity, it could lead to EPS dilution. Valuation of 38 times and 32 times FY25 and 26 EPS offer little comfort.

Also read: Tata Motors sees mutual funds pick up shares worth Rs 12,000 crore in August

Inventory levels have surged to 90-120 days, with nearly every variant now available off the shelf. This is forcing automakers offer discounts, analysts tracking the sector said. The segment comes off a high base as the sector has performed exceedingly well in the last couple of years. "High base, coupled with the election, soaring temperatures and a rise in the cost of funding has led to such a downfall in the segment," Amit Khurana, Head of Equity Research at Dolat Capital, said in a conversation with Moneycontrol.

Read more: Adani Group denies report Swiss authorities froze $310 million in funds

A large chunk of Samvaradhana's revenue emanates from manufacturing wiring harnesses. These harnesses are crucial to both, electric vehicles as well as conventional combustion engine vehicles.

At about 11 am, shares were trading at Rs 186, lower by 1.5 percent from the previous close on the NSE. SAMIL shares have rallied in excess of 82 percent since the start of the year.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.