Buy This Large Cap Automobile Stock For 34% Upside As Recommended By ICICI Securities

Leading brokerage firm ICICI Securities has placed a "Buy" on Samvardhana Motherson International Ltd. (SAMIL) with a target price of Rs 110 apiece, implying a potential upside of up to 34% from its current level. SAMIL is a large cap Automobile sector stock engaged in the manufacture and sale of components to automotive original equipment manufacturers. It has a market capitalisation of Rs 55,668.30 crore.

Stock Outlook & Returns

The current market price of SAMIL on NSE is Rs 82.15 apiece, up 0.24% from its previous close. It recorded its 52 week high on 21 February 2022 at Rs 106.33 apiece and 52 week low on 25 October 2022 at Rs 61.80 apiece, respectively.

The stock has given 2.69% positive return in 1 week, 12.53% in 1 month and 14.9% in 3 months, respectively. In the last 1 year the stock has moved up 4.78%, and 33.63% in the past 3 years, respectively. However, in the past 5 years, it has fallen 21.54%.

 

ICICI Securities Suggests Buy the Stock with a Target Price of Rs 110/share

According to the brokerage, Samvardhana Motherson International (SAMIL) has reached an agreement to acquire 100% equity stake in SAS Autosystemtechnik GmbH from Faurecia for an enterprise value of EUR540mn. SAS is a leading global provider of cockpit module assemblies for cars with manufacturing facilities/offices across 12 countries with a total headcount of ~5,000. For SAS, ~50% of its revenue comes from EV programmes and its largest customer is a leading global EV maker with other key customers being VW Group, Daimler and Stellantis. With net revenue of ~EUR900mn and EBITDA margin of ~11.5% in CY22, the said deal is valued at a trailing EV/EBITDA of ~5.4x. SAS will give SAMIL capability for cockpit module assembly, door panels, cooling modules, front-end modules, logistics-related services for just-in-time supply-chain management, etc. Our analysis suggests (assuming cost of debt at ~5%), post funding EUR540mn through fresh debt, SAS would deliver ~Rs2.5bn in terms of PAT for SAMIL in FY25E as against our existing FY25E PAT estimate of Rs34bn. Thus the deal will likely help SAMIL grow its earnings more profitably than the existing portfolio - other than giving exposure to key EV-making global OEMs and exposure to efficient logistical management in the automotive industry. "Post the deal, we expect 'net debt / equity' for SAMIL at ~0.2x by FY25E vs being a net-debt-free entity otherwise. We retain our BUY rating on SAMIL with DCF-based price target of Rs110, implying ~20x FY25E earnings," the brokerage has said.

 

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.