Samvardhana Motherson: MOFSL shares SAMIL target after PV wiring harness entry

MOFSL, in a fresh note on Samvardhana Motherson International Ltd (SAMIL), said the proposed acquisition of Nexans AutoElectric would mark SAMIL’s entry into the passenger vehicle wiring harness segment, open up a new long-term growth avenue, and strengthen its presence with premium global automakers.

Motherson, through its material subsidiary Motherson Global Investments BV and step-down subsidiaries across geographies, entered into exclusive negotiations to acquire 100 per cent of the business, including assets and select real estate, of Nexans AutoElectric GmbH and Elektrokontact GmbH, along with their stakes in overseas subsidiaries. AutoElectric is a 60-year-old global manufacturer of automotive wiring harnesses for passenger and commercial vehicles, operating 22 facilities across 11 countries, including Germany, the US, Mexico, China and several European locations.

MOFSL noted that AutoElectric reported Calendar 2024 revenue of EUR 749 million, with around 81 per cent derived from passenger vehicles and the balance from commercial vehicles. Geographically, about 74 per cent of revenue came from Europe and North Africa, 24 per cent from the US and Mexico, and the remainder from China. Key customers included BMW, Mercedes-Benz, Daimler and General Motors.

The agreed purchase consideration stood at EUR 207 million on a cash- and debt-free basis, with the final payout subject to closing adjustments. The transaction was expected to close by the first quarter of FY27, subject to regulatory approvals and works council consultations. In 2024, AutoElectric generated Ebitda margins of around 6 per cent, implying a valuation of about 4.3x EV/Ebitda, MOFSL said.

The brokerage highlighted multiple strategic synergies from the acquisition, including joint development of next-generation products across passenger and commercial vehicle platforms, cross-selling opportunities to AutoElectric’s customer base, access to advanced automation capabilities in engine harnesses, and immediate entry into relationships with premium carmakers.

MOFSL said this is SAMIL’s first acquisition in the passenger vehicle wiring harness segment following the demerger and aligned well with its long-term strategy to diversify revenues under its “3CX10” framework. The brokerage believed the deal would create incremental growth opportunities over the coming years, supported by complementary product portfolios and customer relationships.

On the outlook, MOFSL expects SAMIL to continue outperforming global automobile production, driven by premiumisation, the electric vehicle transition, a strong order backlog across auto and non-auto segments, and successful integration of recent acquisitions. While tariff-related uncertainties could lead to near-term disruption in select geographies, the brokerage said SAMIL was likely to be relatively insulated due to its localised manufacturing footprint and ability to realign supply chains. It added that such disruptions could accelerate industry consolidation, benefiting scale players such as SAMIL over the long term.

MOFSL reiterated its BUY rating on the stock and maintained its target price of Rs 129, based on 24x Sep-27E earnings per share.