Samvardhana Motherson could surpass its 52-week-high: Buy post Q3 earnings?

Samvardhana Motherson Automotive Systems Group BV (SMRPBV), a wholly owned subsidiary of Samvardhana Motherson International Limited (SAMIL), has entered into an agreement to acquire a 100% shareholding in SAS Autosystemtechnik GmbH (Germany), which has an enterprise value of 540 million euros.

Samvardhana Motherson International acquisition in SAS Autosystemtechnik GmbH will increase its integration in the global automotive supply chain and increase its customer proximity. The completion of the envisaged transaction will be subject to customary regulatory approvals and would be expected by Q2 FY24 (July-Sept 23), said Motherson in a filing.

Q3 earnings of Samvardhana Motherson

During Q3FY23, the quarterly revenues of Samvardhana Motherson International reached Rs. 20,226 crores, up by 11% QoQ and by 25% YoY, whereas the company said it reported an EBITDA of ₹1,684 crores, up by 13% QoQ and by 44% YoY, the company said its growth in absolute EBITDA was achieved on account of production volume recovery and improved realisations. The net profit of Samvardhana Motherson International stood at ₹454 crores in Q3FY23, up by 85% QoQ and by 388% YoY. The company said its growth in revenue and net profit was recorded on the back of operational efficiencies.

Commenting on the results, Mr. Vivek Chaand Sehgal, Chairman, Motherson said, said “These results demonstrate strong fundamentals of the company and continued focus on operational efficiencies. Our teams across the world have worked very hard during the challenging quarters and would like to congratulate them for their efforts. With further improvement expected in business environment, we are poised to deliver greater value to our stakeholders. We also want to thank our customers for their continued trust in Motherson.”

Buy Samvardhana Motherson?

Post entering into acquisition and Q3 earnings of Motherson, the brokerage firm ICICI Securities said “Samvardhana Motherson International (SAMIL) has reached an agreement to acquire 100% equity stake in SAS Autosystemtechnik GmbH from Faurecia for an enterprise value of EUR540mn. SAS is a leading global provider of cockpit module assemblies for cars with manufacturing facilities/offices across 12 countries with a total headcount of ~5,000. For SAS, ~50% of its revenue comes from EV programmes and its largest customer is a leading global EV maker with other key customers being VW Group, Daimler and Stellantis. With net revenue of ~EUR900mn and EBITDA margin of ~11.5% in CY22, the said deal is valued at a trailing EV/EBITDA of ~5.4x. SAS will give SAMIL capability for cockpit module assembly, door panels, cooling modules, front-end modules, logistics-related services for just-in-time supply-chain management, etc.”

The brokerage further added that “Our analysis suggests (assuming cost of debt at ~5%), post funding EUR540mn through fresh debt, SAS would deliver ~Rs2.5bn in terms of PAT for SAMIL in FY25E as against our existing FY25E PAT estimate of Rs34bn. Thus the deal will likely help SAMIL grow its earnings more profitably than the existing portfolio – other than giving exposure to key EV-making global OEMs and exposure to efficient logistical management in the automotive industry. Post the deal, we expect ‘net debt / equity’ for SAMIL at ~0.2x by FY25E vs being a net-debt-free entity otherwise. We retain our BUY rating on SAMIL with DCF-based price target of Rs110, implying ~20x FY25E earnings.”

The shares of Samvardhana Motherson International closed today on the NSE at ₹81.95 apiece, down by 0.12% from the previous close of ₹82.05. The stock touched a 52-week-high of ₹106.17 on (23-Feb-2022) and a 52-week-low of ₹61.80 on (25-Oct-2022), The target price of Rs110 for Samvardhana Motherson if achieved is indicating the highest price point from its 1-year high level.

Disclaimer: .he views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.