Samvardhana Motherson's margin drag could persist

Demand pressures, increased costs could weigh in near term

- RAM PRASAD SAHU

Multiple headwinds dented the operating performance of the country's largest listed auto component maker by revenues, Samvardhana Motherson.

Given the lower than expected operating profit margins and weak demand trends for its key segments, most brokerages have cut their earnings estimates.

The uncertainty over tariffs and auto demand has led to a 13 per cent fall in the stock price from the June highs.

The company's operating profit at ₹2,458 crore was 10 per cent below estimates while operating profit margins were down 150 basis points to 8.1 per cent.

The impact on profitability was on account of structural challenges in Europe, timing lag in pass-through of tariff-related costs, start-up costs in the non-auto segment, and early-stage integration adjustments for acquired assets.

Going ahead, brokerages expect pressure on margins due to demand pressures and increased costs.