Dolat Capital's research report on Suprajit Engineering
Surpajit Eng reported decent performance amid challenging conditions. EBIDTA was Rs.549mn (-13.6% YoY), with a 14.1% margin (-62bps YoY, vs. Est. 12.8%), strong operating performance in the core cable business was partially offset by fall in Phoenix margin. The core cable business benefited from strong replacement and export demand and increase in content per vehicle. Phoenix Lamp’s revenue de-grew by 11% YoY to Rs.732 mn, and margin contracted sharply to 4.1% YoY, due to several one offs. The SENA division’s revenue fell 12% YoY to Rs.867mn and margin was 12.2% YoY. As 2W and replacement segment together contribute about 65% of overall sales for SEL, we expect a quicker recovery in the business after the lockdown is over. We believe recovery in 2W domestic demand, capacity expansion in the cables business (250mn to 300mn cables), increase in content per vehicle, addition of new clients, and new product development in the non-automotive business will potentially support growth in the medium term. Net debt was a comfortable Rs 2.4bn in FY20 (vs 2.5bn in FY19), with a Net DE ratio of 0.29x (vs 0.32x in FY19).
Outlook
At CMP, the stock is available at 19/13x the FY21E/FY22EPS, which is lower than its historical mean of 22x. We recommend investors to Buy the stock with TP Rs.176 (18x FY22E EPS).
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