Brokerage firm Motilal Oswal has emerged bullish on Auto Ancillaries sector stock, Samvardhana Motherson International Ltd. The brokerage has assigned buy call to the stock with a target price of Rs 95 apiece. The analyst expects that investors can fetch 27% return.
According to Oswal, "Vision 2025 is the guiding force for the next phase of growth for the company. Like in the last five-year plan, we believe MOTHERSO would focus on profitable growth rather than acquisitions to meet revenue targets." Check key takeaways below:
1. Samvardhana Motherson Stock Performance & Return
The last trading price of the stock is Rs 75 apiece with an intraday gain of 1.96%. The company has a market capitalisation of Rs 51,127 crore. The stock has declined 37% in last 5-years, gained 15% in last 3-years, and again fell 30% in last 1-year. It surged by 15% in last 3-months.
2. Strong Content Enhancement Opportunities Across Businesses
MOTHERSO's products are big beneficiaries of increasing premiumization and electrification trends. The trend favoring SUVs benefits all the key businesses of the company as content goes up between 20% and 200% over hatchbacks.
Likewise, sale of higher trim levels also leads to an increase in content by 10% to 200% for top variant over base variant. Lastly, content in EVs goes up by 40% to 240% (over 7x increase in 2W wiring harness) as against relevant ICE counterparts. The company expects the share of EVs to improve to 20%/38% by FY25/FY29 in global markets (from 2% in FY20).
3. Valuation & View
According to Motilal Oswal, "For organic growth, it would need to enable healthy operating environment, which has been adverse for the last 2-3 years. While 40% RoCE target looks unlikely even if there are industry tailwinds, we expect strong recovery in capital efficiency led by improving asset utilization and profitability. The stock trades at 18.6x/14x FY24E/FY25E consol. EPS. Maintain BUY with a TP of INR95 (premised on Sep'24E SOTP)."
4. About Samvardhana Motherson International
The Company was Incorporated on 19th December, 1986 as a private limited company and was changed into a public limited company on 29th April 1987. The Company's objects is to manufacture integrated wiring harnesses wires, high tension cords and components for integrated wiring harnesses including plastic and metal parts.
The Company acquired Noida Steel Fabricators Ltd in 1987. and commenced manufacture of plastic and steel components used in the integrated wiring harness. The company's unit for automotive and electric industry is situated at Noida.
The stock has been picked from the brokerage report of Motilal Oswal. 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 check with certified experts before taking any investment decision.