MOTHERSON - Samvardhana Motherson International Limited Share Price

In their recent earnings call, management of Samvardhana Motherson International Limited (SAMIL) expressed a positive outlook for the company following a milestone year marking 50 years since its inception. For FY25, the company achieved record revenues of approximately INR 113,600 crores, a 15% year-on-year increase, with EBITDA rising by 17% to INR 10,877 crores, and profit after tax surging by 40% to INR 3,803 crores.

Management highlighted several forward-looking points, including:

1. Current Market Dynamics: Global light vehicle production declined by around 1% to about 89.7 million units, with emerging markets like India and China showing low single-digit growth. The company remains focused on its execution capabilities and diversified business model as a buffer against market volatilities.

2. Capex Guidance: For FY26, SAMIL's capital expenditure is expected to be INR 6,000 crores, split evenly between regular and growth-oriented projects. This includes ongoing expansion in consumer electronics, aiming for 15-17 million units capacity by FY26, with the current focus on non-automotive growth.

3. Debt Management: The company has improved its leverage ratio to 0.9x net debt-to-EBITDA, maintaining strong financial discipline while pursuing growth.

4. Acquisition Strategy: Management remains open to acquisitions, particularly those with pre-existing customer demand. They emphasized the importance of customer backing for any acquisition decisions.

5. Long-term Goals: For Vision 2030, management set an ambitious revenue target of US$108 billion, maintaining a return on capital employed (ROCE) goal of 40%. This reflects confidence in sustained growth across various sectors, including automotive and aerospace.

6. New Business Ventures: Management highlighted that the aerospace business has grown fivefold, and consumer electronics, with an already operational plant, is positioned for significant expansion as future facilities come online.

This strategic roadmap underscores SAMIL's commitment to navigating market challenges while pursuing diversified growth avenues.

Below are the major questions from the Q&A section of the earnings transcript for Samvardhana Motherson International Limited along with detailed answers:

1. Question: "You've given $2.7 billion of non-auto order book. Where is the remaining $1.4 billion coming from?" Answer: "The $1.4 billion is from various sectors including consumer electronics, which is experiencing rapid growth due to operational plants already in place. This segment is expected to expand further in the coming quarters. We anticipate greater visibility and orders once new plants ramp up."

2. Question: "What does the capacity of 15 million to 17 million units by end of FY '26 specifically refer to?" Answer: "This refers to our joint venture predominantly in glass production, which isn't limited to just phones but can cater to various products. The current focus is on phone screens, but capabilities will expand to other devices."

3. Question: "What causes the increased costs in the module and polymer business?" Answer: "We faced significant cost pressures due to customer program adjustments and launch issues. However, we are implementing improvements and expect margins to recover as operations stabilize."

4. Question: "With regard to the ongoing supply chain shifts, how does Motherson plan to increase its market presence?" Answer: "As we focus on local production, we expect to gain market share amid these shifts. Our close relationships with customers and ability to adapt quickly have proven beneficial, allowing us to reliably meet their needs even amid market volatility."

5. Question: "Can you elaborate on the aerospace division's margin changes?" Answer: "While we've seen strong revenue growth in aerospace, margins have been affected due to integration challenges. We're focused on optimizing this segment and expect margins to improve as we expand our facilities and customer base."

6. Question: "What are your targets for Vision 2030?" Answer: "We're targeting $108 billion in top-line revenue by 2030, maintaining a return on capital employed target of 40%. Specific details will be revealed during the upcoming investor conference."

7. Question: "What debt of INR 8,500 crores have you raised, and what will it be used for?" Answer: "This is an in-principle approval for potential future debt needs. When utilized, we will disclose the specific projects and expenditures involved."

8. Question: "Will there be PLI applications for electronic components in the consumer electronics sector?" Answer: "Yes, we are eligible for PLI benefits as well as other state incentives for electronic manufacturing, which align with our capacity expansion goals."

9. Question: "With your recent CAPEX commitment, how much has been spent so far and will the entire amount be used in FY '26?" Answer: "We have spent around INR 900-1,000 crores so far out of the INR 2,600 crores commitment. Most of this will likely be used in FY '26, especially as we prepare a larger facility for mid-FY '27."

10. Question: "How is the organic and inorganic revenue split for Q4 FY25?" Answer: "For FY25, we achieved approximately INR 8,500 crores from inorganic growth, while organic growth was around 7-8% year-on-year, with Q4 being relatively flat on a quarter-on-quarter basis."