Buy Suprajit Engineering; target of Rs 245: Dolat Capital Market

Dolat Capital Market's research report on Suprajit Engineering

Suprajit Engineering(SEL) displayed strong all-round performance in Q2FY21. Revenue grew by 11% YoY Rs. 4.4bn led by strong growth in Phoenix lighting (14% YoY) and Automotive able division (12% YoY). EBITDA grew by 31% YoY to Rs. 735mn. Margin expanded by 258bps YoY to 16.6% led by high aftermarket and export revenue along with various cost control initiatives. Phoenix lighting revenue grew 14% YoY to Rs 922mn and SENA division (non-automotive cable) grew by 7% YoY to Rs 786mn. Management stated that the outlook for the Q3 looks promising with robust business across the Indian OEM and aftermarket along with Automotive and non-Automotive Exports. We maintain our positive stance on the stock led by 1) recovery in domestic 2W volume (market share of 65% and accounts for the largest share (37%) in the company’s overall revenue mix, 2) upbeat outlook for 4W export (led by volume recovery in volume of its key clients, GM, BMW, VW and JLR, 3) Revenue and margin revival in SENA division through increasing supply from India and entry into new areas such as agriculture, construction and power sports vehicles and 4) strong aftermarket both cable and lamp division.

Outlook

We increase EPS estimates by 18/7% for FY22/23E. At CMP, the stock is available at 18/16x of FY22E/FY23EPS, which is lower than its historical mean of 22x. We recommend BUY with an upgraded target price of Rs 245 (20x FY23E EPS).

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