Indian auto parts manufacturer Samvardhana (NS:SAMD) Motherson International Ltd (SMIL) posted a substantial year-over-year profit increase for the second quarter, though the results fell short of analysts' expectations as the company navigates a challenging automotive market. Net profit rose more than four-fold to INR 8.8 billion ($104 million) for the July-September 2024 period, boosted by steady revenue growth from its diverse client base, which includes major automakers like Maruti Suzuki (NS:MRTI), Mercedes-Benz, and Audi.
India’s automotive sector saw a decline in dealer shipments for the first time in two years during the quarter, as carmakers attempted to manage rising inventory levels. This slowdown directly impacted SMIL, which derives approximately 75% of its revenue from automotive products such as bumpers and mirrors.
The company's revenue from operations reached INR 278.12 billion, a growth rate of 18.2% from the prior year. However, this was below the INR 281.88 billion analyst forecast and marked a decline from the 28.3% growth recorded in the same period last year. SMIL faced rising expenses, with the cost of raw materials and services increasing by 10.7%, bringing total expenses up 18% year-over-year to INR 270.13 billion.
The company’s EBITDA margin showed mixed results, improving slightly from 8.5% a year ago to 8.9% this quarter but slipping from the 9.6% recorded in the previous quarter.
Reflecting on these results, SMIL’s Chairman, Vivek Chaand Sehgal, emphasized the company’s resilience amid a challenging market. "Our strong leverage management has positioned us for sustainable growth, with a balance sheet that supports future investments," he noted.
Sehgal highlighted SMIL’s consistent growth in non-automotive sectors, which contributes to the company’s stability and diversification. He also pointed out that the company's automotive business pipeline stands at approximately $88 billion, underscoring the trust SMIL has earned from its customers.
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