 "Samvardhana Motherson")
Multiple headwinds dented the operating performance of the country’s largest listed auto component maker by revenues, Samvardhana Motherson.
Given the lower-than-expected operating profit margins and weak demand trends for its key segments, most brokerages have cut their earnings estimates.
The uncertainty over tariffs and auto demand has led to a 13 per cent fall in the stock prices from the June highs.
The company’s operating profit at ₹2,458 crore was 10 per cent below estimates while operating profit margins were down 150 basis points to 8.1 per cent.
The impact on profitability was on account of structural challenges in Europe, timing lag in pass through of tariff-related costs, start-up costs in the non-auto segment, and early-stage integration adjustments for acquired assets.
Going ahead, brokerages expect pressure on margins due to demand pressures and increased costs.
Analysts led by Saksham Kaushal of JM Financial Research have reduced their operating profit margin estimates by 20 basis points (bps) for FY26 and by 30 bps for FY27.
They believe that near-term margin pressures are likely to persist, given weak demand in developed markets and ramp-up costs from greenfields.
Revenues at the consolidated level saw an increase of 5 per cent year-on-year (Y-o-Y) on the back of robust performance in emerging business, which rose 43 per cent with 12 per cent growth in the integrated assembly segment and about 4 per cent growth in the wiring harness division and vision systems.
The modules and polymer segment revenues were down 1 per cent.
While Motilal Oswal Research has cut its net profit estimates by 9 per cent for FY26 to incorporate a weak Q1 performance and an adverse near-term macro in key regions, it is positive on the long term outlook and has maintained a buy rating.
Aniket Mhatre of the brokerage expects the company to continue to outperform global automobile sales. He felt it would be fuelled by rising premiumisation and electric vehicle transition, a robust order backlog in autos and non-autos, and successful integration of recent acquisitions.
HDFC Securities believes that the continuing global demand headwinds and supplier distress coupled with a strong balance sheet are beneficial for the company. It expects the company to close on acquisition/s, now that the US tariff scenario is getting less foggy.
On the impact of US tariffs, the company highlighted that exports from India to the US were just $10 million or 0.3 per cent of consolidated revenues. Other exports into the US are mostly via Mexico and are United States-Mexico-Canada or USMCA compliant. Thus the impact is minimal and it is in discussion with auto makers for pass-through of costs related to non-USMCA compliant parts.
Kotak Research, too, believes that the company will benefit over the medium term from an increase in content per vehicle in passenger vehicles.
It would be driven by mergers and acquisitions (M&As) and premiumisation, strong relationships with automakers, consolidation of suppliers and robust growth in the non-automotive business.
It, however, has a sell rating as valuations are in the expensive zone.
