Anand Rathi
Sundram Fasteners reported good set of numbers for the quarter under review. Revenue from operations improved by 19.7% year-on-year to Rs 10,215 million. The export sales for the quarter increase of 29.7%.
The company’s continued investments for manufacturing of new products are expected to result in further improvement in performance going forward.
On profitability front, the EBITDA from operations for the quarter improved by 28.1% year-on-year. The operating margin has improved by ~123bps as a result of product mix and stable cost structure.
The company is significantly adding capacity and has incurred ~Rs 2170 million capital expenditure in FY18. Management noted that most of the capacity investment were incurred to dovetail production plans to those of key customers. Management expect to invest ~Rs 3500 million in FY2019.
SFL expanding its capacity and making concentrated efforts to improve the product mix with focus on high-value products and increased contribution of exports. SFL is a quality ancillary player with robust return ratios and is poised to further improve its earnings growth momentum.
Anticipating the future growth potential of the auto component industry and the positioning of SFL as a multi-product and multi-location company, we feel that it has high growth potential. We maintain our buy rating on the stock with a target price of Rs 760 per share.
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