Brokerage firm Jefferies has upgrades shares of Samvardhana Motherson International Ltd. (SAMIL), the auto components manufacturer, to buy from the earlier rating of neutral. It has also raised the price target on the stock to Rs 115 from Rs 70 earlier.
The revised price target from Jefferies implies a potential upside of 23 percent from Wednesday's closing levels.
In a note, Jefferies mentioned that Samvardhana Motherson's operating profit began to improve in financial year 2023 after four tough years. It now expects the company's operating profit or EBITDA to double and earnings per share (EPS) to triple over financial year 2023-2026 led by a supportive operating environment and profit accretion due to acquisitions.
Jefferies has also upgraded its EPS projections for Samvardhana Motherson for financial year 2024-2025 by 18-42 percent respectively.
Despite the stock rising nearly 30 percent in 2023, it has underperformed the Nifty 50 index by 40 percent over the last two years. The brokerage termed Samvardhana Motherson's valuations of 15 times financial year 2025 estimated price-to-earnings as 'reasonable.'
However, Jefferies warned that a potential stake sale by Sumitomo Wiring Systems, which owns around 14 percent stake in the company, could act as an overhang on the stock.
Sumitomo Wiring Systems had sold around 3.4 percent stake in SAMIL via block deals in March 2023.
Samvardhana Motherson earlier this month announced that it signed an agreement to acquire 100 percent stake in Rollon Hydraulics Pvt Ltd at an enterprise value of Rs 76.5 crore.
It also signed agreements for a $14 million investment in Prysm Systems and taking an 81 percent stake in Yachiyo’s four-wheeler business. Yachiyo is a subsidiary of Honda Motor which comprises 4W and 2W businesses.
Earlier, Nomura also upgraded SAMIL to buy and raised the price target to Rs 105 while CLSA assigned a buy rating with a price target of Rs 102 per share.
JPMorgan has an overweight rating with a target price of Rs 95 per share. Out of the 21 analysts that track Samvardhana Motherson, 19 of them have a buy rating, while one each have a hold and sell call.
Shares of Samvardhana Motherson are trading 2.6 percent higher at Rs 95.55.
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