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Informist, Thursday, Jan. 23, 2025

By Sunil Raghu

AHMEDABAD – Auto components manufacturer Samvardhana Motherson International Ltd. is expected to post strong on-year growth in key earnings parameters for the December quarter, driven by execution of order book and contribution from acquisitions.

In the last four months, the auto components company, directly or through subsidiaries, has regularly bought stakes in companies of its interest. On Sept. 16, it announced the acquisition of 11% stake in Nasdaq-listed REE Automotive Ltd. for $15 million. Again, on Dec. 6, the company announced that its subsidiary would buy a 95% stake in Japan-based auto components maker Atsumitec Co. Ltd. for $57 million by Apr-Jun of 2025. On Dec. 16, the company's board approved the acquisition of Brazil-based Baldi Industria E Comercio Ltda. for a cash consideration of $7.8 million.

On the financial front, the company's consolidated net profit for Oct-Dec is seen at INR 9.3 billion, up 72.4% from the year-ago period, according to the average of estimates from five brokerages. The highest projection for the bottom line is INR 10.4 billion from Elara Securities (India) Pvt. Ltd., and the lowest is INR 7.9 billion from Motilal Oswal Financial Services Ltd.

In Oct-Dec of 2023, the company's consolidated net profit had jumped 19.4% on year to INR 5.4 billion, despite a 315.2% on-year rise in finance costs at INR 6.2 billion and a 23.13% rise in the cost of raw materials consumed, at INR 142.1 billion.

Samvardhana Motherson's top line for Oct-Dec is seen at INR 290.5 billion, up 13.3% on year. The highest and lowest estimates for revenue are INR 295.5 billion from Elara Securities and INR 286.2 billion from Nomura Equity Research, respectively.

According to Motilal Oswal Financial Services, the auto component maker's top line growth will be driven by execution of a healthy order book, along with contribution from recent acquisitions. "Overall, we expect earnings to jump 47% on a year-on-year basis mainly due to the contributions from acquisitions," the brokerage said. 

The company's operating profit, or earnings before interest, tax, depreciation, and amortisation, is estimated at INR 27.2 billion, up 10.7% on year. The highest projection for EBITDA is INR 27.8 billion from Elara Securities and the lowest is INR 26.5 billion from Motilal Oswal Financial Services.

On a sequential basis, Samvardhana Motherson is expected to report a relatively stable to slightly positive financial performance. While the bottom line is seen up 6.2% on quarter, its top line is projected to rise 4.5%. On the profitability front, the EBITDA is projected to rise 2.9% to INR 27.2 billion.

According to Nuvama Wealth Management Ltd., the on-year revenue growth would be mainly supported by accounting of previously announced acquisitions. The EBITDA margin would expand on better net pricing and value accretive acquisitions.

Samvardhana Motherson, formerly Motherson Sumi Systems, manufactures automotive components such as wiring harnesses, mirrors, camera-based detection systems, polymer products, and lighting for vehicles. The company has a presence in 44 countries and supplies components to popular brands such as Audi, Mercedes-Benz, BMW and Ford.

Samvardhana Motherson will announce its earnings for the December quarter on Feb. 6. 

According to analysts, the underlying industry outlook and commentary on the company's efforts to increase content per vehicle will be some of the key things to watch out for. 

On Sept. 20, the company had said it had issued 259.87 million equity shares to qualified institutional buyers at INR 190 apiece. It also issued 150,000 compulsorily convertible debentures at INR 100,000 apiece. Post the issue, the company's stock touched a 52-week high of INR 216.99 per share on Sept. 27, 2024. The company's stock has since fallen 35.3% to a low of INR 138.11 per share on Jan. 13.

At 0934 IST, shares traded 0.3% higher at INR 143.13 per share on the National Stock Exchange. At the current price, the stock is down nearly 10% from levels it saw on Nov. 12, when it had announced its September quarter earnings. On the day of its Jul-Sept earnings, the stock had closed 6.4% down but had opened at INR 167, up 1.9% the following day and ended at INR 160.50, down 3.9% after hitting a low of INR 158.80, down 4.9%.

Following are the Oct-Dec earnings estimates for Samvardhana Motherson based on reports from five brokerage firms in descending order of the estimate of net profit: 

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Tanima Banerjee

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