Samvardhana Motherson Q2 Results Review Cost Headwinds: Motilal Oswal

Samvardhana Motherson International Ltd. reported lower-than-expected Ebitda of Rs 18.2 billion (versus estimate Rs 19.2 billion), wherein the margin stood lower at 8.4% (versus estimate 8.9%) led by subdued growth in the U.S./Europe and stabilised but still elevated cost levels. While macro outlook remains uncertain, receding cost headwinds and the realignment of capacities in developed markets will help improve efficiency going forward.

The next three quarters would be transitory because of continuous consolidation of five other businesses between Q3 FY24 to Q1FY25. We maintain our FY24/25E EPS, as incremental contribution from the acquisition of SAS Autosystemtechnik GmbH will be offset by higher interest and depreciation costs. 

Currently, we are not modeling the performance of new acquisitions, which are yet to be closed.

Maintain ‘Buy’ with a target price of Rs 110, based on Sep-25E SoTP and including Rs 8/share for the recent acquisitions.

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