Samvardhana Motherson International Q1 FY27 earnings call

Samvardhana Motherson International Limited reported its highest-ever quarterly revenue in Q1 FY27, growing 17% year-on-year and 3% sequentially. This growth was notable as Q1 historically sees a sequential decline. EBITDA increased by 26% year-on-year, leading to a 60 basis points improvement in EBITDA margin. Normalized PAT saw a 55% year-on-year increase, while reported PAT grew 102% due to base quarter normalization.

The company completed three key acquisitions: Shenzhen Autocruis (digital vision systems), Nexans Autoelectric (PV & CV wiring harness globally), and Yutaka Giken (exhaust systems, brake discs). These acquisitions are expected to contribute close to USD 2 billion to the top-line annually and broaden Motherson's technology offerings and product portfolio, particularly in next-generation mobility and vehicle systems. Management aims for these businesses to achieve 40% ROCE over time^⏳.

The consumer electronics business continues to scale meaningfully, with the third facility on track for commissioning in Q3 FY27. This facility, which will be the largest in Motherson, involves a capex of approximately INR 65 billion (Motherson's share) spread over three years, targeting an annual manufacturing capacity of 40 million units. The total capex for all three consumer electronics facilities (GF1, GF2, GF3) is projected to be around INR 7,500 crores, with about one-third already incurred.

Despite a challenging external environment, including a 1.8% de-growth in the light vehicle industry, a 40% year-on-year increase in copper prices, and a 55% year-on-year surge in polymer prices in Germany, Motherson maintained or improved its margins. This was primarily attributed to restructuring initiatives in the modules and polymer business, headcount optimization, and footprint rationalization, which helped absorb input cost inflation and logistics cost increases (World Container Index up 40% YoY).

Motherson's China business is well-balanced, transitioning from primarily international OEMs to also include local Chinese OEMs, while maintaining profitability as a key criterion. The company leverages its strong relationships with local Chinese JV partners to secure opportunities as these OEMs expand into Europe and other global markets, positioning Motherson as an an independent supplier.

The company spent INR 1,614 crores on capex in Q1, aligning with its full-year guidance of INR 6,000 crores (+/- 10%). Despite significant investments in growth, Motherson improved its leverage position to an all-time low of 0.8x, well within its financial policy ceiling of 2.5x and internal aspiration of below 1.5x, demonstrating strong financial prudence.

Motherson is actively pursuing new growth opportunities in areas like robotics, industrial automation, AI, and semiconductors, leveraging its D.E.M.A.L. (design, engineering, manufacturing, assembly, logistics) capabilities. The company is positioning itself to supply to these niche, high-growth industries, with a strategy of local production and sourcing to enhance competitiveness amidst volatile logistics costs.

Addressing past underperformance in the health and medical segment, where revenues had degrown and losses increased over the last three years, management expressed confidence in a turnaround. With a new leadership and the commissioning of its largest health/medical plant in Chennai, the company expects to reverse the negative trend in coming quarters and achieve meaningful growth within its 5-year plan, focusing on a B2B supplier model.