On Monday, CLSA analyst Basudeb Banerjee adjusted the price target for Samvardhana Motherson International (MOTHERSO:IN), reducing it to INR167 from INR190, while keeping an Outperform (2) rating on the stock. The revision reflects a cautious stance on the company's organic growth projections, despite a solid financial performance in the face of challenging macroeconomic conditions.
Samvardhana Motherson International reported an Ebitda margin of 9.7%, a 91 basis points increase quarter-over-quarter, matching CLSA's estimates. The company's revenue grew approximately 8% year-over-year, which is noteworthy given the global decline in auto production. However, Samvardhana Motherson's organic revenue growth did not show any year-over-year increase.
Banerjee noted that the business is in a turbulent phase, with weak demand from Original Equipment Manufacturers (OEMs) in developed markets such as the US and the European Union affecting passenger vehicle demand growth. Despite these challenges, Samvardhana Motherson has managed to significantly reduce its debt levels to 0.9 times net debt to Ebitda, a considerable improvement from the more typical level of 2.5 times. This reduction in debt puts the company in a potentially advantageous position to pursue inorganic growth opportunities, although these prospects are not factored into CLSA's current forecasts.
The revised price target comes after a reassessment of the company's growth estimates. CLSA has lowered its FY26/27CL earnings per share (EPS) predictions by around 10%, attributing this to the anticipated weakness in the US and EU markets. Additionally, the target price-earnings (PE) multiple has been adjusted from 25 times to 23 times, aligning with the company's 10-year average 1-year forward PE. Despite these adjustments, the analyst maintains an Outperform rating, signaling continued confidence in the company's performance potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.