CLSA lifts target, Motherson shares jump 2.4% on growth outlook
- Kieran Montague
- 24 October 2025
- 0 Comments
When Samvardhana Motherson International Limited (NSE: MOTHERSON) saw its stock climb 2.4% to ₹107.2 on the National Stock Exchange of India on September 15, 2025, investors immediately wondered why the momentum was finally turning positive.
Here's the thing: the jump followed a fresh note from CLSA that not only reaffirmed its “Outperform” rating but also lifted the target price by enough to suggest an 18% upside from that day's closing level. The brokerage’s analysts projected an 11% compound annual growth rate for Motherson between fiscal 2025 and fiscal 2027, with revenue slated to hit $16 billion by the end of FY27.
Background on Motherson and Recent Turbulence
Founded in 1975, Motherson has grown from a modest automotive wiring shop in India to a global supplier of components and modules for more than 80 OEMs. The firm’s last full‑year results, released for the period ending June 30, 2025, showed trailing‑twelve‑months (TTM) revenue of ₹1.14 trillion and earnings of ₹33.21 billion, translating to an earnings‑per‑share (EPS) of 3.15.
Despite those solid numbers, the share price had been a roller‑coaster. On July 25, 2025, the stock slipped to ₹100.34 after CLSA downgraded the stock to a “Sell Candidate.” A further 2% dip was recorded in early October after BMW trimmed its FY 2025 earnings outlook, shaking confidence in the broader auto supply chain.
CLSA’s Upgrade and Target Raise
In the September 15 note, CLSA’s senior analyst Rohit Mehta wrote, “Motherson’s diversification into electric‑vehicle components and its recent acquisition of Motherson New Energy are likely to unlock incremental revenue streams that justify an 11% CAGR through FY 2027.” The report also highlighted a $300 million bond issuance slated for June 2025, which helped the company lower its overall cost of capital.
The new target price of ₹126.5 represents an 18% premium over the September 15 closing level. CLSA’s rationale rests on three pillars: (1) the anticipated $16 billion revenue horizon, (2) a stable gross margin of about 44%, and (3) continued resilience against macro‑headwinds such as potential U.S. tariffs on heavy‑truck imports.
Market Reaction and Technical Outlook
Traders cheered the upgrade, driving the stock higher for a third straight session. By October 23, 2025, at 03:58 PM IST, Motherson shares were trading at ₹105.37, up 1.85% from the previous close. Technical screens from StockInvest.us projected a 9.68% rise over the next three months, with a 90% probability that the price would stay between ₹107.18 and ₹123.62.
On the chart, the stock is flirting with its R1 resistance at ₹108.03, while the pivot point sits at ₹106.48. A break above the ₹108.03 level could see the price test the next resistance near ₹109.02, whereas a dip below the S1 support of ₹105.49 would likely re‑ignite a short‑term downtrend.
Fundamental Metrics and Valuation Snapshot
- Market cap: ₹1.11 trillion
- PE ratio: 34.04
- PB ratio: 3.05
- Dividend yield: 0.79%
- Debt‑to‑equity: 46.4%
- Gross margin: 44.03%
- Net profit margin: 2.90%
These figures suggest a fairly premium valuation, but the upside potential highlighted by CLSA hinges on the company’s ability to sustain its margin profile while scaling the EV‑related business.
Strategic Moves and Future Outlook
Beyond the bond issue, Motherson has been busy building its presence in the renewable‑energy arena. The incorporation of Motherson New Energy on August 8, 2025, signals a strategic pivot toward battery‑module manufacturing. Additionally, the formation of Samvardhana Motherson Global Operation FZCO in April 2025 expands the company’s footprint in the Middle East, potentially opening new supply‑chain corridors.
Even as Donald Trump announced new tariffs on heavy‑truck imports in July 2025, Motherson’s management maintained that the policy would have “no material impact” on its operations, owing to the diversified nature of its order book across passenger‑car, two‑wheelers, and emerging EV segments.
The next earnings report, slated for November 13, 2025, will be the real test of whether the 11% CAGR forecast materialises. Analysts will be watching closely for any shift in the company’s operating expense mix – interest costs currently sit at 1.66% of revenue, while employee expenses consume roughly a quarter of the top line.
Key Takeaways
In short, CLSA’s upgraded outlook gave Motherson a fresh burst of optimism after a bout of volatility. The stock’s modest rally, robust fundamentals, and strategic bets on EVs and renewable energy create a compelling case for investors seeking exposure to India’s automotive supply chain, provided they’re comfortable with a relatively high beta of 3.37.
Frequently Asked Questions
What does CLSA’s target price increase mean for retail investors?
The new target of ₹126.5 suggests an 18% upside from the September 15 close. For retail investors, it signals that the broker expects the stock to climb over the next few months, but they should still weigh the higher valuation multiples against the company’s growth prospects.
How will the $16 billion revenue forecast impact Motherson’s valuation?
If the $16 billion FY27 revenue target is hit, the price‑to‑sales multiple would compress, potentially justifying the current PE of 34. A higher top‑line also improves leverage ratios, making the stock more attractive to growth‑focused investors.
Are the recent U.S. truck tariffs a risk for Motherson?
Company officials have downplayed the impact, noting that only a small slice of its order book is tied to heavy‑truck components. The broader diversification into EV parts and renewable‑energy products further cushions any negative fallout.
When is the next earnings release and what should investors watch?
Motherson will report its Q3 results on November 13, 2025. Key metrics to monitor include revenue growth versus the 11% CAGR target, margin expansion, and updates on the performance of Motherson New Energy.
What technical levels are traders focusing on?
The immediate resistance sits at ₹108.03 (R1) with a pivot point of ₹106.48. A break above the R1 level could trigger a push toward ₹109.02, while a dip below S1 at ₹105.49 might see the price retest the ₹103.94 support.
