1,91,000% Up, 9:18 Bonus: Auto Stock Below Rs 160 Makes Investors Crorepati; Rs 5,500 Turns To Rs 1 Cr; BUY?

Samvardhana Motherson International is one of the most affordable stocks trading below Rs 155 under the large-cap basket. This company in the field of auto components and equipment, has seen significant upside in 25 years, and charms like massive free bonus shares issuance and two-time stock split coupled with dividend rewards have only made investors crorepati. Motherson shares have extended their impressive performance to hit a new 52-week high. Should you still buy it?

The latest upside in Motherson shares can be attributed to the company's healthy and beat earnings, while its outlook looks promising with enhancement in non-auto segments as well.

On NSE, Motherson shares surged by more than 3.1% to hit a new 52-week high of Rs 152.40 apiece. The stock currently is at Rs 152 apiece, up by 2.9% with a market cap of Rs 1,03,001.60 crore.

Mother-son's YTD performance has seen a double-digit upside to the tune of 43%, while in a year the stock surged by nearly 90%. But adjusted to its stock splits, dividends and bonus issue, Motherson shares have given humungous 1,90,712.5% returns compared to its latest new high.

25 years ago, Motherson's share price stood at Rs 0.080 per share on January 1, 1999. If an investor had bought Motherson shares for Rs 5,500 on January 1, 1999, they would have bagged returns up to 1,04,89,187.5 or Rs 1.048 crore, taking its corpus value to Rs 1,04,94,687.5 or Rs 1.049 crore by May 30.

In 25 years, Motherson has rewarded its investors significantly.

Bonus Issue: Motherson delivered free bonus shares in the ratio of 1:2 each in October 2022, October 2018, July 2017, July 2015, December 2013, October 2012, August 2007, February 2005, and November 2000. In total, Motherson has paid 9 bonus shares against 18 existing shares, hence a total ratio of 9:18.

Stock Split: The first split carried by Motherson was in October 2002 in the ratio of 1:2, meaning, 1 equity share with a face value of Rs 10 split into two shares at a face value of Rs 5 each. Two years later, in March 2004, the company's stock split again but in the ratio of 1:5, where 1 existing share of a face value of Rs 5 each was split into 5 new shares of a face value of Rs 1 each.

Dividend: As per Trendlyne data, Motherson has delivered up to 23 dividends since August 2001. The company has now announced its highest dividend in three years for FY24. Its dividend yield is at 0.43%.

This week, Motherson has recommended a dividend of Rs 0.80 per share for FY24, which is higher compared to a payout of Rs 0.65 per share each in FY23 and FY22. The record date for the upcoming dividend will be fixed in due course.

In FY24, the company earned a net profit of Rs 2,716 crore, up by 82% YoY, while revenue rose by 25% YoY to Rs 98,692 crore, and EBITDA increased by 46% to Rs 9,325 crore. SAMIL maintained healthy financial control with reduced leverage and net debt.

Vivek Chaand Sehgal, Chairman, Motherson said, "We also foresee good traction from our non-automotive businesses, such as aerospace, consumer electronics, and health and medical. To fully utilise our manufacturing capabilities, we are setting up new facilities across emerging markets. We are grateful to our customers for their trust and confidence in Motherson and want to express our sincere appreciation to our people globally for their dedication and hard work."

Should You BUY Samvardhana Motherson Shares?

There is a potential upside of nearly 18% in Motherson stock.

In Motilal Oswal's view, given its well-diversified presence across components, geographies and customers, MOTHERSO is emerging as the key beneficiary of the growing popularity of EVs and the rising trend of premiumization across segments. This is evident in a significant ramp-up in its order book, with its booked business scaling up to USD83.9b.

Further, Motilal added, "The stock trades at reasonable valuations of 22.2x/18.2x FY25E/FY26E consolidated EPS. Our positive view on MOTHERSO remains intact based on the ramp-up of new businesses in non-auto, execution of a strong order book for SMRPBV and capacities in place for growth. We reiterate our BUY rating with a revised TP of INR170 based on 22x Mar'26E EPS."

Along similar lines, Elara Capital said, "We are impressed by core organic revenue growth of 12% and EBITDA growth of 30% in FY24. We expect a 16% revenue CAGR during FY24-26E, led by a 6% CAGR in organic revenues and the rest by new acquisitions. We increase our EBITDA by 14% for FY25E and 9% for FY26E, owing to
margin increase and incorporation of acquisitions like Yachiyo in our financials."

Elara's note said, "We introduce FY27 estimates. SAMIL continues to score high on our LACE 2.0 megatrends framework of evaluating auto ancillaries as per our January 2024 note. We reiterate Buy with a higher TP of INR 173 from INR 141 on 20x (from 18x) June26E P/E."

But the highest target price is set by JM Financial to Rs 180 per share on Motherson.

JM's note said, "Over the medium-to-longer term we expect premiumisation and electrification to drive content per vehicle for SAMIL's powertrain-agnostic product portfolio. Recent acquisitions have started reflecting favourably on overall performance and the company indicated of a strong pipeline going forward."

Lastly, the brokerage added, "Net debt / EBITDA decreased sequentially from 1.7x to 1.4x. We believe the company with its global presence, an expanding product portfolio and a wide customer base presents a multi-year growth opportunity. We expect revenue/EPS CAGR of 17%/43% over FY24-26E. We maintain a BUY rating with a Mar'25 TP of INR 180 (20x FY26e EPS; 18x earlier). The slowdown in global demand remains a key risk."

SAMIL is one of the world's leading specialised automotive component manufacturing companies for OEMs. The company, formerly known as Motherson Sumi Systems Limited, was established in 1986 as a joint venture with Sumitomo Wiring Systems and was listed in 1993 on BSE and NSE in India. The company is focused, dynamic, and progressive, providing customers with innovative and value-added products, services, and solutions. With a diverse global customer base of nearly all leading automobile manufacturers globally, the company supports its customers from more than 400 facilities across 44 countries in five continents.

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.