MOTHERSON - Samvardhana Motherson International Limited Share Price

Outlook by Management:
Samvardhana Motherson International Limited (SAMIL) remains optimistic about leveraging its diversified business model and robust balance sheet to navigate transitional industry dynamics, including the global shift to clean mobility and geopolitical challenges. Management expects steady growth supported by strategic expansions (notably in non-automotive sectors like consumer electronics), operational efficiency, and customer collaboration. The company aims to capitalize on emerging opportunities in automotive and non-automotive verticals while maintaining a disciplined approach to capital allocation.

Major Points Highlighted:

1. Financial Performance:

   • Q3 FY25 revenue grew 8% YoY to Rs.27,666 crore; EBITDA rose 13% to Rs.2,776 crore, with PAT up 62% (reported) to Rs.879 crore.
   • Net debt reduced to Rs.10,500 crore (leverage ratio at 0.9x, lowest in a decade).
   • ROCE improved to 18% (9M FY25).

2. Business Resilience:

   • Outpaced auto industry growth (7.5% vs. industry decline of 1.2% YoY) due to geographic and customer diversification.
   • Non-automotive initiatives (consumer electronics, aerospace) are scaling, with the first consumer electronics plant operational and ramping up.

3. Strategic Initiatives:

   • Expansions: Operationalized two greenfield plants (consumer electronics, precision metals); six more under development.
   • Atsumitec Acquisition: Strengthens global footprint (Vietnam, Indonesia) and adds precision machining capabilities (revenue: $412 million, 8% margins).
   • EV/ICE Neutrality: Over 95% of products are powertrain-agnostic, positioning SAMIL to adapt to varying OEM strategies.

4. Operational Efficiency:

   • Focus on cost optimization and working capital management (supply chain stabilization to release liquidity).
   • Revised FY25 capex guidance lowered to ~Rs.4,500 crore (±5%) from Rs.5,000 crore, prioritizing growth in emerging markets.

5. Market Trends:

   • Geopolitical and tariff uncertainties managed via a "globally local" manufacturing strategy.
   • Energy costs in Europe and commodity volatility (e.g., copper) remain concerns, offset by logistics cost improvements.

6. Emerging Businesses:

   • Consumer electronics revenue to ramp up sharply from Q4; aerospace division targeting Tier-1 supplier status with new facilities by 2026.
   • Atsumitec integration to enhance cross-selling and synergies across automotive/non-auto segments.

Management emphasized confidence in sustaining growth through operational agility, customer partnerships, and strategic investments, despite near-term macroeconomic headwinds.

Question 1:
Aditya Jhawar (Investec): "My first question is on our emerging business. It would be great if you can give a breakup of revenue of the emerging business as we had given in Q1 presentation."
Answer:
Kunal Malani stated that revenue details for emerging businesses are disclosed annually and would be provided in the next quarterly update.

Question 2:
Aditya Jhawar (Investec): "On the consumer business, how should we expect a ramp-up over the next one to two years? Any broad numbers you can share?"
Answer:
No specific figures were shared due to confidentiality, but Kunal Malani described the ramp-up as "extremely significant," likening it to a "Burj Khalifa kind of ride," with a second facility expected by Q2 FY26.

Question 3:
Aditya Jhawar (Investec): "Any update on the JV investment? Our JV partner was supposed to infuse equity with 10% stake and scale up to 49%."
Answer:
Laksh Vaaman Sehgal confirmed the JV partner received approval for equity infusion and expects final internal approvals soon, with more details next quarter.

Question 4:
Aditya Jhawar (Investec): "What drove the margin expansion in the wiring harness business, and is it sustainable?"
Answer:
Pankaj Mital attributed margin improvement to operational optimizations, productivity gains, and favorable product/geographic mix, with sustainability tied to stable markets and execution.

Question 5:
Kapil Singh (Nomura): "Why did emerging business revenue dip in Q3 despite the new consumer electronics plant? How long until optimal margins for this division?"
Answer:
The dip was due to declines in India's commercial vehicle/heavy equipment segments. Consumer electronics margins are expected to stabilize rapidly, with full ramp-up underway.

Question 6:
Kapil Singh (Nomura): "Why are interest costs elevated? What's the normalized run-rate?"
Answer:
Higher interest costs included forex losses, convertible debenture accruals, and delayed QIP debt repayment impact. A reduction of Rs.50"“75 crore is expected in Q4.

Question 7:
Gunjan Prithyani (Bank of America): "Can you elaborate on aerospace growth and order book prospects?"
Answer:
Laksh Vaaman Sehgal highlighted plans to 10x aerospace revenues in coming years, with new facilities and Tier-1 supplier status updates promised next quarter.

Question 8:
Gunjan Prithyani (Bank of America): "What is Atsumitec's revenue contribution and Japan's post-acquisition exposure?"
Answer:
Atsumitec (Rs.3,400 crore revenue) will consolidate from Q1 FY26. Japan's contribution will grow via cross-selling and global synergies, though exact revenue share wasn't specified.

Question 9:
Amyn Pirani (JPMorgan): "Is the Atsumitec acquisition a shift toward powertrain-linked components?"
Answer:
No strategic shift: Atsumitec's capabilities (e.g., precision machining) are engine-agnostic and complementary. The focus remains on leveraging synergies for long-term growth.

Question 10:
Raghunandan N (Nuvama): "How will reduced FY25 capex (Rs.4,500 crore) impact growth plans?"
Answer:
Capex cuts relate to delayed SOPs and regional recalibration (Europe/Americas), but growth-focused spending in emerging markets remains intact.

Question 11:
Pankaj (Affluent Assets): "How will EU/Mexico tariff changes impact SAMIL?"
Answer:
Vivek Chand Sehgal noted tariffs would likely increase topline with pass-through pricing after a 2-3 month lag, with minimal bottom-line impact due to localized operations.

Question 12:
Rajat Jain (Vision Systems): "What caused adverse geographic/platform mix in Vision Systems?"
Answer:
Delays in new model launches and volatile OEM strategies in Europe/US impacted margins, offset partly by growth in China. Stability is expected in subsequent quarters.

Question 13:
Laxmi Narayana (Tunga): "What's the revenue split for wiring harness exports from India?"
Answer:
Exports exist but are limited as SAMIL prioritizes localizing production near customers. Specific revenue splits were not disclosed.

Question 14:
Rishi Vora (Kodak): "Why did "˜other operating revenue' surge in Q3?"
Answer:
Kunal Malani linked the increase to interest income from parked QIP proceeds and scrap sales, though exact breakups weren't detailed.