Samvardhana Motherson: Easy gains no longer in sight, says analyst after stock hits record high

Shares of Samvardhana Motherson International Ltd rose to a record high today led by a sharp reduction in concerns around global auto demand, but the easy gains from valuation rerating may now be behind it. That is the core message from Sharad Awasthi, Head of Research, Private Client Group at SMIFS Securities, who believes the auto ancillary major has largely completed its catch-up trade after a prolonged period of undervaluation. The auto parts stock rose to a record high of Rs 173.25 against the previous close of Rs 169.95. Market cap of the auto parts firm stood at Rs 1.79 lakh crore. Later, the stock closed on a flat note at Rs 170.35.

Why the Street is rewarding Motherson again

Awasthi, in an exclusive interaction with BTTV said the biggest shift has been the fading of fears that weak automobile demand would weigh heavily on the company’s performance. “The uncertainty around the fact that they would not be able to perform and there would be a lot of pressure on auto sales... has come down substantially over the last six months,” he said.

That change matters because Samvardhana Motherson, India’s largest auto ancillary player, has historically commanded premium valuations within the sector. The premium, according to Awasthi, stems from the company’s long track record of scaling through acquisitions and integrating those assets effectively across cycles and geographies.

M&A pedigree remains a key differentiator

The company’s acquisition-led growth model continues to shape investor perception. Awasthi described its M&A execution over the past decade as “very stunning,” arguing that the market has repeatedly rewarded the group for converting acquisitions into sustained growth.

That broader credibility is important in a market where investors are increasingly favouring businesses with global networks, product depth and execution discipline. In the wider manufacturing and industrial landscape, those traits are becoming critical markers of quality, especially as investors look for scalable Indian companies with durable export linkages.

Rerating story may be nearing its limit

Even so, Awasthi struck a measured note on upside from current levels. He said Samvardhana Motherson had earlier slipped to lower valuations because a few quarters of weaker numbers, commodity pressures, and a sluggish passenger and commercial vehicle cycle clouded the outlook.

Now, with the stock back around the Rs 170-180 zone, he believes “the valuation catch-up story is more or less done.” He also does not expect any large acquisition announcement in the near term that could trigger another leg of rerating.

What investors should watch next

The implication is clear: future returns may depend more on earnings delivery than on multiple expansion. “At best you could expect market link returns now,” Awasthi said, adding that “there is not much pressure on auto sales, so that is converting into good numbers for Samvardhana.”

For the broader auto ancillary pack, that signals a more selective phase. Stocks such as Sona Comstar and Minda Corp may continue to attract attention, but in Motherson’s case, the market appears to be shifting from recovery optimism to execution scrutiny.

In an exclusive interaction with BTTV earlier this month, Gandharv Tongia, the group CFO of the firm shared the plans of the company. Gandharv said the company is working to achieve a topline of $100 billion by 2030.

"And we are making all the possible steps both organically and inorganically. I were to give you guidance, there's only one project on which all of us are working, which is to achieve topline of $108 billion by 2030,"  he said.

The company delivered a healthy operating performance in the first quarter, with EBITDA increasing to Rs 3,096 crore. Despite the improvement in operating earnings, EBITDA margin declined to 8.8%, marking a sequential contraction of around 230 basis points from the previous quarter.

Net profit more than doubled year-on-year to Rs 1,032 crore, driven primarily by robust growth in revenue during the quarter.

On the expansion front, the company commissioned three new plants during Q1. Another 13 facilities are currently at various stages of development and are expected to be commissioned during FY27, supporting the company’s capacity expansion plans.

The company has earmarked a capital expenditure of Rs 6,000 crore for FY27 as it continues to invest in expanding its manufacturing footprint and strengthening capacity.