Samvardhana Motherson - Scaling Up Inorganically And Profitably: ICICI Securities

ICICI Securities Report

Samvardhana Motherson International Ltd. has reached an agreement to acquire 100% equity stake in SAS Autosystemtechnik GmbH from Faurecia for an enterprise of €540 million. SAS is a leading global provider of cockpit module assemblies for cars with manufacturing facilities/offices across 12 countries with a total headcount of ~5,000.

For SAS, ~50% of its revenue comes from electric vehicle programmes and its largest customer is a leading global EV maker with other key customers being VolksWagen Group, Daimler and Stellantis.

With net revenue of ~€900 million and Ebitda margin of ~11.5% in CY22, the said deal is d at a trailing enterprise /Ebitd of ~5.4 times. SAS will give Samvardhana Motherson International capability for cockpit module assembly, door panels, cooling modules, front-end modules, logistics-related services for just-in-time supply-chain management, etc.

Our analysis suggests (assuming cost of debt at ~5%), post funding €540 million through fresh debt, SAS would deliver ~Rs 2.5 billion in terms of profit after tax for Samvardhana Motherson International in FY25E as against our existing FY25E profit after tax estimate of Rs 34 billion.Thus the deal will likely help Samvardhana Motherson International grow its earnings more profitably than the existing portfolio – other than giving exposure to key EV-making global original equipment manufacturers and exposure to efficient logistical management in the automotive industry.

Post the deal, we expect ‘net debt / equity’ for Samvardhana Motherson International at ~0.2 times by FY25E vs being a net-debt-free entity otherwise.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.