Samvardhana Motherson margins beat estimates as acquisitions strengthen emerging business growth

Investment View and Valuation

Motilal Oswal Financial Services retained its BUY view on Samvardhana Motherson (SAMIL) following a resilient 1QFY27 performance. The broker expects SAMIL to outperform global automobile sales, supported by vehicle premiumisation, the electric-vehicle transition, a robust automotive and non-automotive order backlog, and the integration of recent acquisitions.

Motilal Oswal also believes that an adverse global macroeconomic environment could accelerate industry consolidation and position SAMIL as a long-term beneficiary. The revised target price is Rs 178, based on 24 times FY28E EPS, compared with the CMP of Rs 155.

1QFY27 Financial Performance

Reported consolidated 1QFY27 revenue increased about 17 per cent year on year to Rs 352 billion, broadly in line with Motilal Oswal's estimate of Rs 350 billion. Adjusted PAT rose about 70 per cent year on year to Rs 10.3 billion, exceeding the broker's forecast of Rs 9 billion.

Consolidated EBITDA margin expanded 65 basis points year on year to 8.8 per cent, ahead of the 8.3 per cent estimate, although it declined 230 basis points sequentially. The margin outperformance reflected operational efficiencies and cost optimisation, which offset input-cost inflation.

Segment Performance

Capacity Expansion and Capital Allocation

Management commissioned three manufacturing plants in 1QFY27 and expects ten new facilities to become operational during FY27. FY27 capex guidance was maintained at Rs 60 billion, plus or minus 10 per cent.

About half of planned capex is allocated to growth initiatives, with nearly 60 per cent of growth capex intended for non-automotive businesses. Management has planned around Rs 75 billion of consumer-electronics investment, including Rs 65 billion for a mother plant to be deployed over three years. The plant is expected to have annual capacity of 42 million units, and one-third of this capex has been completed.

Effective net debt declined to about Rs 97.5 billion from Rs 112 billion a year earlier, while leverage remained at 0.8 times sequentially.

Acquisitions and Growth Initiatives

SAMIL completed the acquisition of Nexans Autoelectric on July 3, 2026 and Yutaka Giken on July 21, 2026. Together, these businesses are expected to add nearly US$2 billion of annualised revenue, with Nexans beginning to contribute from 2QFY27.

SAMIL also announced the acquisition of Shenzhen Autocruis, a Chinese digital vision and monitoring-systems supplier with about US$6.8 million of annual revenue. Completion is expected in 3QFY27.

Earnings Revisions

Following the quarter, Motilal Oswal raised its FY27E and FY28E consolidated estimates.

Key Execution Considerations

• Integration of the Nexans Autoelectric and Yutaka Giken acquisitions, as well as the proposed Shenzhen Autocruis acquisition.
• Delivery of capacity expansion plans and non-automotive investments.
• Exposure to global automotive demand and the broader global macroeconomic environment.
• Potential pressure from commodity-cost movements.