Posted on February 17, 2025, by Niftynews
Despite a series of target price cuts following Samvardhana Motherson share price movement after its Q3 results, analysts maintain a positive outlook on the company, citing its resilient growth in a volatile auto market and promising long-term prospects. Here’s a breakdown of what analysts are saying about the stock.
Analysts Reduce Target Prices for Samvardhana Motherson
Several major brokerages, including Nomura, Motilal Oswal, JPMorgan, Jefferies, and BofA Securities, have recently reduced their target prices for Samvardhana Motherson International Ltd. following the company’s Q3FY25 earnings report. Despite this, the consensus remains positive, with most analysts maintaining buy or outperform calls on the stock.
- Nomura: Reduced its target price to ₹155 from ₹209 per share, offering an upside of 23.7% from its closing price of ₹125.33 on February 14. The brokerage sees the company’s acquisitions and consumer electronics ramp-up as key growth drivers, although it acknowledges that the auto sector may remain a near-term drag.
- JPMorgan: Cut its target to ₹160 from ₹190, maintaining an ‘overweight’ rating. JPMorgan highlighted organic business resilience and revenue growth but also noted that the auto sector’s weak outlook and production slowdowns are a concern.
- Motilal Oswal: Maintains a buy call with a reduced target price of ₹160, citing the company’s strong resilience amidst weak market conditions and expecting the non-auto sector to drive growth in the near term.
- CLSA: Downgraded its target to ₹167 from ₹190, maintaining an ‘outperform’ rating. They noted Samvardhana’s strong margin expansion and its reduced debt levels, with organic growth staying resilient despite macroeconomic challenges.
- BofA Securities: Continued to recommend a buy, with a target of ₹160, pointing out that the company’s margin expansion, strong aerospace orders, and strategic acquisitions are positive factors for growth. The company’s reduced debt and positive revenue growth also make it attractive for long-term investors.
- Jefferies: Also cut its target to ₹165 from ₹172 but remained bullish, with a 31.65% upside from the stock’s current price. Jefferies cited the company’s efforts to diversify into electronics and aerospace and its strong EBITDA growth despite challenges in the auto sector.
Q3 Results: Strong Earnings Despite Market Headwinds
Samvardhana Motherson Q3FY25 earnings report showed a 62% increase in net profit, reaching ₹879 crore, with an 8% increase in revenue to ₹27,666 crore. EBITDA grew 13%, reaching ₹2,687 crore, and the company’s margin expanded to 9.7% from 9.2% the previous year. These results were in line with estimates, though some analysts felt that the earnings were below expectations, particularly concerning the auto sector’s performance.
While the global auto environment remains challenging, the company’s focus on non-auto segments like electronics, aerospace, and greenfield plants has provided some optimism for investors. With a reduced debt and efforts to expand its electronic and aerospace divisions, Samvardhana Motherson share price remains attractive for those with a long-term view despite short-term hurdles in the auto industry.
Should You Buy Samvardhana Motherson Shares Now?
Samvardhana Motherson share price has taken a hit recently, falling 32% over the past six months. On February 17, it traded 2.61% lower at ₹122.91, following the target price reductions by analysts. Despite the challenges in the auto market, analysts are still optimistic about the company’s long-term growth potential.
Here’s a quick breakdown:
- Positive Growth in Non-Auto Segments: Samvardhana Motherson is expanding its electronics and aerospace business, which will drive growth in the coming years.
- Reduced Debt: The company’s strategic focus on reducing debt and managing its capital structure is a positive for investors looking for stability.
- Valuation: Despite the price cuts, the stock remains relatively attractively priced, with analysts suggesting upside potential ranging from 23% to 33%.
Key Takeaways:
- Target Price Reductions: Analyst target prices have been reduced but remain positive overall for Motherson share price.
- Resilient Growth: Samvardhana Motherson’s acquisitions and non-auto business are expected to support long-term growth.
- Challenges in Auto Sector: The near-term outlook for the auto market remains uncertain, with production slowdowns and delayed launches affecting earnings.
Conclusion: With a strong track record of resilience and growth potential in its non-auto businesses, Samvardhana Motherson may still be a solid investment for the long term. However, if you are more risk-averse, it may be prudent to wait for further stabilization in the auto sector before buying. Keep an eye on the stock as it could offer significant upside potential as the company continues to diversify and improve its balance sheet.
