MOTHERSON - Samvardhana Motherson International Limited Share Price

Samvardhana Motherson International Limited reported its Q1 FY '26 results, highlighting robust revenues of INR 30,200 crores, with EBITDA at INR 2,466 crores, and normalized PAT of INR 667 crores. The global light vehicle industry grew by 1.7%, while Motherson achieved a 5% growth despite headwinds from trade policies and geopolitical tensions.

Management emphasized initiatives aimed at mitigating challenges, including a transformative cost-saving plan in Central and West Europe targeting EUR 50 million, with provisions of approximately INR 136 crores recorded. The company remains cautious but optimistic, aiming to capitalize on sustained growth opportunities while investing INR 1,200 crores in capex, maintaining guidance of INR 6,000 crores for the year.

Forward-looking statements include expectations of a stronger second half of FY '26 as recent acquisitions integrate and greenfield assets ramp up production. The company is prepared for increased demand in emerging markets with new facilities underway and is actively managing working capital to better respond to market conditions. Management's strategic focus on local production minimized exposure to U.S. tariffs, with less than $10 million in export content for Q1, indicating limited impact from tariff-induced costs.

Overall, Motherson aims to stabilize margins affected by external environmental pressures, with expectations of improved profitability as the year progresses, particularly in Q3 and Q4.

Key Questions and Answers from the Earnings Transcript

Question 1: "Can you help us understand the impact of U.S. tariffs on the consumer business, considering recent news?"
Answer: "Currently, there's no impact on our consumer electronics business, which is exempt from U.S. tariffs. Demand remains strong, and we are optimistic about setting up facilities to meet future requirements. The larger facility will become operational by mid-next year, aligning with anticipated growth."

Question 2: "How much capex have we incurred so far, and what is the revenue ramp-up expected?"
Answer: "For Q1, our capex was INR 1,200 crores. We continue to guide for a full-year capex of around INR 6,000 crores. Half of this has already been spent. We anticipate ramping up revenues significantly as new facilities come online in the coming quarters."

Question 3: "What are the challenges affecting EBITDA margins and how are we addressing them?"
Answer: "We expect a rebound in margins in Q3 and Q4, especially post-summer holidays. The dip we experienced wasn't due to losing contracts but rather transitional challenges in the market and adjustments from recent acquisitions."

Question 4: "What is our approach to passing through tariff costs to customers?"
Answer: "Our contracts allow for tariff pass-throughs. Given the unique products we offer, we don't face significant competition issues, which helps us maintain margins despite external pressures."

Question 5: "How are we addressing working capital challenges amidst temporary geopolitical and supply chain issues?"
Answer: "We've kept higher working capital due to uncertainties in tariffs and geopolitics, which we believe are transitory. We're optimistic about reducing working capital needs as these issues stabilize, particularly in H2."

Question 6: "How has the acquisition of Atsumitec contributed to our revenues?"
Answer: "Atsumitec contributed approximately INR 700 crores in revenues this quarter. Excluding this acquisition, our growth was about 2%. Our strategy integrates acquisitions to enhance overall resilience and growth."

Question 7: "Is the recent slowdown in the modules and polymer business solely due to cost issues?"
Answer: "The current softness in these divisions can be attributed to seasonal factors and the transitional period post-acquisitions. We're in a good position to recover with several key launches expected in the next quarters."

Question 8: "What are our expectations around greenfield projects and their profitability?"
Answer: "While these greenfields incur initial startup costs, we expect significant revenue and profitability improvements as they complete commissioning. The impact of these investments will be more visible in the latter half of the year."