Samvardhana Motherson shares: SAMIL a Buy after 8% rally? Targets by Citi, JPMorgan, CLSA

Samvardhana Motherson International Ltd (SAMIL) shares rallied 8 per cent in Friday's trade after the auto components maker reported in-line June quarter results. Analysts said a strong ramp-up in non-auto businesses and robust free cash flow (FCF) should provide the company with greater acquisition optionality going forward. A key growth driver over the next few years will be the rapid scaling of its consumer electronics business, analysts noted.

The stock climbed 8.24 per cent to hit a high o Rs 166.70 on BSE.

Jefferies suggested 'Buy' and a target of Rs 190. CLSA assigned 'Accumulate' to SAMIL with a target of Rs 190. Morgan Stanley is 'overweight' on the stock with a target o Rs 173. Investec advised 'Buy' with a target of Rs 185. Jefferies suggested a target of Rs 190, JPMorgan Rs 170 and Goldman Sachs Rs 158.

Citi's target  for SAMIL at Rs 115 is the lowest on the Street. A target of Rs 195 on SAMIL by ICICI Securities is the highest, so far, post Q1 results.

Nomura said it had expected SAMIL to deliver below-consensus Q1 results. Against that backdrop, the brokerage said consolidated revenue and Ebitda margin were in line with its expectations.

"Our FY27F/28F/29F revenue growth are 11 per cent/12 per cent/18 per cent above consensus driven by the ramp-up of greenfield plants and strong growth in non-auto segments led by consumer electronics. We expect sustained margin improvement with operating leverage. With 6-7% FCF yields (FY28F/29F), further potential exists for acquisition driven growth. We maintain our Buy rating," Nomura said.

As far as the auto industry is concerned, global light vehicle production declined 1.8 per cent YoY in Q1 due to weakness in China. The industry demand, however, is expected to gradually improve, supported by upcoming European OEM launches and continued strength in the North American commercial vehicle market, where production is expected to remain healthy through FY27, Arihant Capital Markets said.

"SAMIL’s FY27 growth outlook is robust, aided by CV industry demand recovery across markets, healthy and rising orderbook across segments, ramp up of consumer electronics business, and integration of new M&As. The 3rd mother plant in consumer electronics to come onstream from 3QFY27, with over two times capacity (41mnpa units) against 2 smaller greenfields (16-17mnpa units)," Emkay Global said.

Emkay said SAMIL has revised its capex for consumer electronics business to Rs 7,500 crore over 2-3 years, indicating strong growth potential here.

New businesses, particularly consumer electronics, and renewed India focus are expected to drive the next leg of growth. Emkay upped its target on SAMIL by 20 per cent to Rs 180 from Rs 150.

HDFC Securities said SAMIL's medium- to long-term growth potential is intact, considering expansion of the newer segments, content addition due to premiumization, addition of new customers, as well as any potential future acquisitions.

Considering structurally improving underlying margins due to benefits from the restructuring exercise in Europe and increasing share of the non-auto business, which provides benefits of diversification, faster growth and lower cyclicality, HDFC Securities raised its target to Rs 165.

"We stay constructive on SAMIL’s prospects led by inorganic initiatives, large order book and rising content. We have built in revenue/earnings CAGR of 16 per cent/31 per cent over FY26–28E. Retain ‘BUY’ with an increased target to Rs 178 (Rs 168 earlier) based on FY28E estimates, implying a blended PE of 26x. At CMP, the stock trades at FY27E/28E PE of 29x/22x," Nuvama Institutional Equities said.

The consensus target for SAMIL stands at Rs 167.57 hinting a muted return potential.