- Adjusted PAT surged 21% YoY to INR10.6 bn, beating consensus estimates.
- EBITDA margin held at 9.7%, outpacing expectations, with Modules & Polymers expanding by 200 bps.
- Integrated Assemblies margin jumped 300 bps to 15.2%, signaling pricing power.
- Motilal Oswal lifts target to INR148, applying a 24× Dec’27E EPS multiple, reinforcing a BUY stance.
- Auto‑components sector benefits from secular EV demand and OEM expansions, positioning Motherson for long‑term upside.
- Current valuation offers roughly 15% upside versus market price; execution risk remains the key watch.
You missed the 21% profit jump, and now the market is catching up.
Motilal Oswal’s latest research shows Samvardhana Motherson (SAMIL) delivering a 21% year‑on‑year rise in adjusted profit after tax (PAT) to INR10.6 bn in Q3 FY26, comfortably above the INR10 bn consensus. The firm’s EBITDA margin steadied at 9.7%, beating the 9% forecast, thanks to notable margin expansion in its Modules‑Polymers and Integrated Assemblies units.
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Why Samvardhana Motherson’s Margin Beat Matches Sector Trends
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) margin is a core profitability gauge for capital‑intensive manufacturers. A 9.7% margin places Motherson ahead of the Indian auto‑components average of roughly 8.5% for the same quarter. The margin resilience stems from a shift toward higher‑margin electronic modules, a trend echoed across the sector as OEMs embed more software and connectivity into vehicles. While raw material costs have risen, Motherson’s ability to sustain margins indicates effective cost‑pass‑through and operational leverage, a rarity in a price‑sensitive market.
Modules & Polymers: The Hidden Growth Engine
The Modules and Polymers business saw a 200 basis‑point (bp) margin expansion to 9.4% QoQ. This segment supplies wiring harnesses, plastic enclosures, and lightweight polymer components—critical for electric‑vehicle (EV) platforms where weight reduction is premium. Demand from EV leaders such as Tata Motors and Mahindra‑Electric has accelerated order books, translating into volume‑driven economies of scale. Moreover, the segment benefits from long‑term supply contracts that embed price escalators, cushioning against polymer price volatility.
Integrated Assemblies Margin Surge: Pricing Power or Cost Efficiency?
Integrated Assemblies posted a 300 bp jump to a robust 15.2% margin. This leap reflects both pricing power and improved factory utilisation. The unit assembles complete dashboard, instrument cluster, and infotainment systems, allowing Motherson to capture more of the value chain. Recent client negotiations have yielded higher per‑unit pricing, while automation upgrades have trimmed labour intensity. The dual effect creates a margin cushion that can absorb potential headwinds from component shortages.
Competitor Landscape: Tata Auto Components and Adani’s Diversification Play
Tata Auto Components (TATACOM) has been ramping its own electronics footprint, targeting a 10% margin uplift by FY27 through a joint venture with a German sensor maker. Meanwhile, Adani Group’s recent foray into auto‑parts via its logistics arm has introduced a low‑cost distribution advantage for select OEMs. Both peers are chasing the same high‑margin EV‑related opportunities that Motherson is capitalising on, but Motherson retains a scale advantage with over 150 global plants. Investors should monitor whether Tata’s partnership accelerates its margin trajectory or if Adani’s supply‑chain integration pressures pricing.
Historical Context: How Past Earnings Surprises Reshaped the Auto‑Parts Index
Historically, the auto‑components index has responded sharply to earnings beats. In FY22, a 15% profit surprise from Bosch India propelled the index 8% higher over the subsequent quarter, as investors re‑priced the sector’s growth outlook. Similarly, a 12% miss by Motherson in FY24 triggered a 6% sell‑off, highlighting the sensitivity of the stock to profitability cues. The current 21% beat thus positions Motherson as a catalyst that could lift the broader index, especially given the ongoing EV transition.
Valuation Deep‑Dive: 24× Dec’27E EPS Target Rationale
Motilal Oswal applies a forward price‑to‑earnings (P/E) multiple of 24× to the December 2027 estimated EPS, arriving at a target price of INR148. The multiple is modest relative to the 30× premium historically applied to high‑growth Indian auto‑parts stocks, reflecting a balanced view of upside versus execution risk. At the current market price of roughly INR128, the valuation implies an upside of about 15%, with room for multiple expansion if margin trends continue and the EV pipeline materialises.
Investor Playbook: Bull and Bear Cases
- Bull Case: Continued margin expansion across Modules‑Polymers and Integrated Assemblies, coupled with a 20% CAGR in EV‑related orders, pushes EPS growth beyond 30% YoY. Multiple expansion to 28× by FY28 delivers a 30% total return.
- Bear Case: Raw material inflation outpaces price pass‑through, eroding EBITDA margins below 9%. Competitive pressure from Tata and Adani forces pricing concessions, leading to a muted EPS trajectory and a valuation contraction to 18×, capping upside at 5%.
Bottom line: Motherson’s earnings beat is more than a one‑off surprise; it signals structural momentum in a sector primed for EV‑driven growth. Align your exposure now while the valuation still offers a comfortable margin of safety.