Buy Samvardhana Motherson International; target of Rs 110: Emkay Global Financial

Emkay Global Financial's research report on Samvardhana Motherson International

SAMIL’s Q2 performance was muted (margins down by 52bps QoQ to 8% vs. our est. of 8.8%), affected by seasonality and one-offs (labor strikes in North America, one-time costs for restructuring some Europe plants). We continue to believe that cyclical recovery in global automotive production (with markets well below their previous highs) and higher wallet share from premiumization and electrification (given SAMIL’s engine-agonistic offerings) will continue to drive healthy 15% revenue CAGR over FY23-26E. We cut FY24E EPS by ~9% (on the Q2 margin miss and elevated interest cost run-rate), with FY25E-26E EPS largely unchanged.

Outlook

We retain BUY on SAMIL, with revised SOTP-based TP of Rs110 (assign 27x/14x/24x rolled over multiples on FY26E to standalone/SMRPBV/MSUMI operations; previous TP: Rs107/share).

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