Samvardhana Motherson International Limited — Q3 FY25 earnings call

Call held 14 Feb 2025

Management summary

SAMIL delivered robust Q3 FY'25 performance demonstrating resilience of its diversified business model amid challenging industry conditions. While global auto industry declined 1.2% (4.8% excluding China), the company achieved 8% revenue growth and 13% EBITDA growth. Key milestone was operationalization of first consumer electronics plant with significant ramp-up in January 2025. The acquisition of Atsumitec expanded global presence and capabilities, while balance sheet strengthened with leverage reaching 10-year low of 0.9x.

Highlights

  • Resilient performance with revenues of Rs. 27,666 crores (8% YoY growth)

  • EBITDA growth of 13% to Rs. 2,776 crores with 10% margin maintained

  • Strong PAT growth of 20% normalized (62% reported) to Rs. 879 crores

  • Net leverage improved to 0.9x, lowest level in 10 years

  • First consumer electronics plant operationalized in November with sharp ramp-up expected

  • Completed acquisition of Atsumitec, expanding global footprint to 7 countries

  • Outperformed industry with 7.5% growth vs 1.2% industry degrowth

  • Capex guidance recalibrated to Rs. 4,500 crores from Rs. 5,000 crores

  • ROCE improved to 18% from 17.3% in previous quarter

  • Strong M&A pipeline across automotive and non-automotive segments

Key financials

2 periods

Headline

  • EBITDA Margin
    10%
    YoY +5%
  • Net Debt to EBITDA
    0.9×
    YoY -20%
  • ROCE (9-month)
    18%
    YoY +7%

Q3

  • Total Revenue
    ₹27,666 Cr
    YoY +8%
  • EBITDA
    ₹2,776 Cr
    YoY +13%
  • PAT - Normalized
    ₹879 Cr
    YoY +20%

What they filed

Q1 FY27: revenue up 16.7%, net profit up 77.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue27,812 27,666 29,317 30,212 30,173 +8%31,409 +14%34,309 +17%35,244 +17%
EBITDA2,448 2,686 2,643 2,458 2,611 +7%3,043 +13%3,791 +43%3,096 +26%
Net profit949 984 1,115 606 846 −11%1,072 +9%1,562 +40%1,076 +78%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

CAPEX

  • FY'25 Investment CAPEX · FY'25 · High confidence Rs. 4,500 crores plus/minus 5%
    we have further recalibrated our Capex estimates for FY '25. We are now estimating to have a reduced spend of about 4,500 crores plus minus 5% versus the earlier guidance

    — Laksh Vaaman Sehgal

Consumer Electronics

  • Production Ramp-up Consumer Electronics · Next 1-2 years · High confidence Burj Khalifa kind of ride
    the ramp up is extremely significant. It will be a Burj Khalifa kind of a ride out

    — Kunal Malani

Working Capital

  • Release by Year-end Working Capital · End of FY'25 · Medium confidence Reduction expected
    supply chain stabilisation and logistics cost decrease supported by port decongestion on key trade routes. This development should help us to release working capital by the end of the year

    — Laksh Vaaman Sehgal

Greenfield Expansion

  • New Plant Commissioning Greenfield Expansion · Next couple of quarters · High confidence 6 additional plants
    an additional six are expected to come on stream in the ensuing couple of quarters

    — Laksh Vaaman Sehgal

Risks & concerns

  • Trade tariff uncertainty and geopolitical landscape shifts

    medium

    While implications not fully understood, company's local manufacturing near customers and pass-through arrangements limit exposure. Management sees potential optimization opportunities across jurisdictions

    Well-positioned due to globally local strategy

  • European energy price trends and commodity volatility

    medium

    Energy prices in Europe on worrying upward trend, copper experiencing price volatility. Company working on cost control measures to mitigate impact

    Monitoring and adapting operations

  • Consumer electronics business execution and ramp-up challenges

    medium

    First plant operationalized with steep ramp-up expected, requiring flawless execution to meet aggressive growth targets

    Confident in capabilities and customer support

  • Indian commercial vehicle market weakness affecting emerging business

    low

    Decline in Indian CV and heavy equipment affecting emerging business segment, but consumer electronics and aerospace growth offsetting impact

    Diversification providing buffer

Q&A highlights

3 direct
Emerging business revenue breakdown and consumer electronics ramp-up Partial
the ramp up is extremely significant. It will be a Burj Khalifa kind of a ride out

Indicates very steep growth trajectory expected for consumer electronics business despite limited disclosure due to confidentiality

Asked by Aditya Jhawar (Investec)

Wiring harness margin expansion drivers Direct
we have received additional orders which have started to kick in and therefore we could balance the portfolio and keep our facilities optimised... we have also in-sourced multiple products

Explains sustainable margin improvement through operational excellence, in-sourcing, and order mix optimization

Asked by Aditya Jhawar (Investec)

Emerging business seasonality and consumer electronics impact Direct
most of our emerging market businesses are in the Indian automotive side... commercial vehicles and businesses associated with it... has been on a decline in India

Clarifies revenue decline was due to Indian CV weakness, not consumer electronics which only contributed for 1 month

Asked by Kapil Singh (Nomura)

JV partner equity investment timeline Direct
they have just received the approval for the equity investment and they are just in the final stages of getting their internal approvals... hopefully by next quarter, we would be able to give you more color

Provides update on partner's equity infusion process which will strengthen consumer electronics venture

Asked by Aditya Jhawar (Investec)

2 min read 5 chapters

Detailed narrative

Industry Outperformance Through Diversified Resilience

SAMIL demonstrated exceptional resilience in Q3 FY'25, achieving 8% revenue growth while the global auto industry declined 1.2% (4.8% excluding China). The company's diversified business model across geographies, customers, and products provided cushion against regional volatilities. Performance was particularly notable given the challenging environment with transitional phase in clean mobility, shifting trade dynamics, and energy price pressures in Europe. The globally local strategy with manufacturing plants near customers minimized tariff exposure and enabled agile response to market changes.

Consumer Electronics Milestone with Aggressive Ramp-up Trajectory

The operationalization of the first consumer electronics plant in November 2024 marked a significant milestone for non-automotive diversification. While initial contribution was limited to one month in Q3, the business showed significant ramp-up in January 2025 with management describing the growth trajectory as 'Burj Khalifa kind of ride'. The JV partner's equity investment approval process is in final stages, expected to provide additional capital and strategic support. This business represents a key pillar of future growth beyond automotive markets.

Strategic Acquisitions Expanding Global Capabilities

The completion of Atsumitec acquisition strengthened Motherson's global footprint across 7 countries including new presence in Vietnam and Indonesia. With $412 million revenue and healthy 8% margin profile, Atsumitec brings in-house capabilities in heat treatment, carburising, and precision machining. The acquisition extends Honda collaboration and provides access to emerging markets growth opportunities. Complementary capabilities with existing operations in India and Mexico create global potential for customer expansion across industries.

Operational Excellence Driving Margin Expansion

Despite challenging market conditions, the company achieved impressive margin expansion in wiring harness business through operational optimization, in-sourcing initiatives, and favorable order mix. The team's relentless focus on productivity improvements, facility optimization, and human resource efficiency delivered sustainable benefits. In-sourcing multiple products provided dual benefits of cost reduction and enhanced customer solutions. These improvements demonstrate the organization's ability to extract value through operational excellence even in volatile environments.

Balance Sheet Strength Enabling Future Opportunities

Net leverage improved to 0.9x, reaching the lowest level in 10 years, reflecting robust balance sheet management despite significant growth investments. QIP proceeds were fully utilized for debt reduction with interest cost benefits flowing from Q4 onwards. ROCE improved to 18% from 17.3% in previous quarter, demonstrating efficient capital allocation. The strong financial position provides flexibility for pursuing large M&A opportunities with hot pipeline across automotive and non-automotive segments while maintaining disciplined approach to capital deployment.

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