India’s auto component sector is a dynamic and growing industry, achieving a record turnover of Rs 6.14 trillion ($73.1 billion) in FY24, marking a 9.8 percent increase from the previous year. It contributes 2.3 percent to GDP, employs over 1.5 million people, and is poised to become the world’s third-largest market by 2025.
Price Movement
With a market capitalization of Rs 92,489.18 crore, the shares of Samvardhana Motherson International Ltd were trading at Rs 131.25 per share, decreasing around 2.78 percent as compared to the previous closing price of Rs 135.00 apiece.
Brokerage Recommendations
CLSA, one of the well-known brokerages globally, gave a ‘Buy’ call on the auto ancillary stock with a target price of Rs 167, indicating a potential upside of 27 percent from Thursday’s closing price of Rs 131 per share.
Brokerage Rationale
CLSA projects Samvardhana Motherson’s revenue to grow at an 11 percent CAGR from FY25 to FY27, reaching $16 billion, with EBITDA margins at 9.5 percent. The firm anticipates steady expansion, driven by strong demand and operational efficiencies, reinforcing its growth trajectory in the automotive components sector.
The brokerage attributes growth to a rising share of Emerging Markets (EMs), SUVs, and EVs, projecting an 11 percent CAGR for FY27- 29, with $20 billion revenue and 9.8 percent margins by FY29. CLSA expects $1.5 billion in cash flows for M&A, supporting this target.
Tariff Impact
Motherson has a strong presence in Europe and the U.S., supplying components to major American carmakers like Tesla and Ford. With significant local manufacturing in both regions, it is less vulnerable to import tariffs than component makers relying solely on exports.
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Business Resilience and Market Conditions
SAMIL’s resilient, diversified business model drives steady performance despite challenges. While the auto industry declined 1.2 percent YoY, SAMIL grew 7.5 percent, outperforming the market. Geopolitical and economic shifts, including clean mobility trends and evolving consumer demand, continue to shape industry dynamics amid global trade uncertainties.
Capex and Growth Initiatives
The company lowered its FY25 Capex guidance to Rs 4,500 crores (±5 percent) from Rs 5,000 crores (±5 percent). It launched two greenfield projects, including a consumer electronics plant and a precision metals module, with six more facilities expected. The consumer electronics plant is ramping up, boosting non-automotive growth.
Challenges and Optimism
The company faces operational challenges, including weak production environments and volatile commodity prices. However, management remains optimistic, viewing market volatility as an opportunity for growth. With a strong order book across various segments, they are confident in successfully navigating these challenges and driving future expansion.
Company Snapshort
Samvardhana Motherson International Limited full system solutions provider to customers in automotive and other industries. It has a diversified product portfolio, which includes electrical distribution systems, fully assembled vehicle interior and exterior modules, and automotive.
Written by Abhishek Singh
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