Samvardhana Motherson International

Analyst Day 2022 – Going from strength to strength

Samvardhana Motherson International (SAMIL) recently held its investor meet to present mid-

term review of its Vision 2025. Despite the challenging start, the company expects to achieve

a target of USD 36bn in revenue by FY25 through organic/inorganic growth and c.25%

contribution from non-automotive businesses. Recovery in global automotive production,

higher content/vehicle and inorganic growth is expected to drive the growth in automotive

business. Strong order book for non-automotive business (led by Aerospace and Medical

segment) will further support the diversification. SAMIL is at the end of its capex cycle and

has requisite capacity to meet the medium-term targets. Lower working capital on easing

supply chain, improving profitability and higher operating leverage is expected to drive ROCE

to 40%. Reiterate BUY with Sept’23 TP of INR 115.

Vision 2025: The sixth five-year plan of SAMIL targets to achieve - a) USD 36bn in

revenue by FY25 with 40% RoCE, b) 3CX10 – no country, customer or component

should contribute more than 10% of revenue, c) 75% of revenue from automotive

industry, 25% from new divisions and, d) 40% consol. profits as dividends (Exhibit 1).

Challenging start to 5-year plan (Vision 2025): During the past 3 years, various challenges

like Covid-19, chip shortages, commodity/energy/labour inflation, etc. have led to decline

in global light vehicle (LV) production from c.93mn units in FY19 to c.76.5mn units in

FY22. Owing to these challenges, SAMIL’s topline remained in the range of USD c.9bn-

10bn between FY19-22. Also, high valuation of global Auto Ancillary companies

restricted large inorganic opportunities. With Covid-19 behind and passenger vehicle

sales recovering from an ebb, most of these challenges are receding. Also, strong order

book, demand for personal mobility and premiumisation trend are expected to drive

topline growth for SAMIL.

Higher volumes, content and inorganic opportunities to drive revenue ~3x to USD 36bn:

SAMIL targets its topline to grow ~3x from USD 12bn in FY23e to USD 36bn by FY25 led

by: 1) recovery in underlying global LV volumes; 2) Higher content per vehicle driven by
shift from ICE to Hybrids/EVs (~2-3x higher content) and premiumization / shift towards

higher variant (~1.5x-2.5x higher content); and 3) customer driven, large inorganic

opportunities. Based on internal accruals and internal target on net debt/EBITDA levels,

the company has USD 2.3bn available to fund the acquisitions. Total booked business (at

SMRPBV level) stands strong at Euro 34bn with share of EV business at 37%. In the

Aerospace business, booked business has doubled last year to USD 400mn+ and the

company is adding 2 new facilities to cater to this demand. In the Health and Medical

business, company’s order book is full and the new greenfield plant in Chennai to meet

this demand will commence operations from Apr’23. Accelerated growth opportunity in

four non-automotive pillars: a) Aerospace, b) Logistics solution, c) Health and Medical

devices and d) Tech & industrial solutions, is expected to drive revenue diversification

(targets 25% share) over medium term.