The country’s largest listed auto parts company by market capitalisation, Samvardhana Motherson International, reported a better than expected operating performance in the second quarter (July-September) of 2025-26 (Q2FY26).
IMAGE: Employees of Motherson Sumi Systems Ltd, work on a car wiring assembly line inside a factory in Noida. Photograph: Anindito Mukherjee/Reuters
Though the global passenger vehicle (PV) market is facing multiple headwinds, the company is outperforming on the back of higher content per vehicle and market share gains.
This has led some brokerages to raise their earnings estimates after the Q2 results.
While the stock has underperformed peers, trading flat over the past year, it has gained about 6 per cent this week.
The company reported consolidated operating profit growth of 7 per cent and margins of 8.7 per cent.
While margins were 10 basis points (bps) lower over the year-ago quarter, they were better than brokerage estimates.
The margins were lower because of structural challenges in the European Union (EU), tariff-related costs, and startup expenses from greenfield projects.
Within segments, the laggards on the profitability front were the wiring harness business, which saw a 70-bp dip year-on-year (Y-o-Y) to 10.5 per cent, and the emerging business, which saw margins fall 380 bps.
The wiring harness business was impacted by the cyclicality in the American commercial vehicle (CV) market while the emerging business faced business-mix issues.
Nuvama Research has increased its operating profit estimates for FY26-FY28 by up to 9 per cent, factoring in higher modules/polymer and emerging division margins as well as Yutaka acquisition.
The brokerage is constructive on the company’s prospects on the back of strong management capability, inorganic initiatives, pending order book, and increasing content.
Consolidated revenue rose 8.5 per cent Y-o-Y, and was largely in line with estimates.
It was driven by volume growth, higher content per vehicle, and the acquisition of Atsumitec.
Adjusted net profit growth was better than estimates due to higher operating profit, higher than expected other income, and lower than expected interest costs.
Given the better-than-expected performance in Q2 despite adverse global macros, Motilal Oswal Research raised its earnings estimates by 9 per cent and 4 per cent for FY26 and FY27, respectively.
Aniket Mhatre of the brokerage expects the company to continue to outperform global automobile sales, fuelled by rising premiumisation and electric vehicle (EV) transition, a robust order backlog in autos and non-autos, and successful integration of recent acquisitions.
The company is positive on the outlook for the second half of FY26, and expects revenue and margins to witness sequential improvement on the back of seasonality, new model launches, and higher utilisation as greenfield units ramp up.
Emkay Research believes that newer businesses (especially consumer electronics) and its renewed India focus are expected to drive the company’s next leg of growth.
The brokerage has trimmed its FY26 earnings estimates on gradual expectations of greenfield rampup and emerging business margin normalisation while maintaining earnings for FY27 and FY28.
The order book stands at $87.2 billion as of September 2025, to be executed over the next five-six years.
While order intake remains healthy, with EV platforms accounting for 22 per cent of the order book, this was down from 24 per cent as automakers are hedging their bets between internal combustion engine (ICE)-based models and hybrid/EV units.
JM Financial Research has maintained a “buy” rating, though it expects near-term margin pressures to persist due to rampup of costs from greenfield units.
The brokerage has marginally lowered its operating profit margin estimates by 20 bps each for FY26 and FY27.
