Buy Samvardhana Motherson International of Rs 97: Emkay Global Financial

Emkay Global Financial's research report on Samvardhana Motherson International

For Q3FY23, SMIL’s consol. revenue grew by 25% YoY to Rs202.3bn, above our estimates due to better revenues in SMRPBV and the standalone divisions. Consol. EBITDA grew by 46% YoY to Rs15.8bn, in line with our estimates. Management expects margin expansion ahead, on cost pass-through, energy cost deflation and better scale. We expect 10% revenue CAGR over FY23-25E, driven by the industry upcycle across regions and better wallet share due to premiumization/ electrification. We expect EBITDA margin to expand, from 7.5% in FY23E to 9.6% in FY25E, driven by better scale, improved net pricing and cost savings.

Outlook

We retain BUY on the stock, with SOTP-based TP of Rs97/share (Rs94 earlier), based on FY25 estimates (Dec-24E earlier). Our target P/E for the standalone operations stands at 30x, for Motherson Wiring at 34x, and for SMRPBV at 15x, based on DCF valuation. Key downside risks: Demand contraction in target markets, weak performance of large clients, and adverse commodity/currency rates.