We initiate coverage on Sandhar Technologies (STL) with BUY and TP of Rs825 (implying 51% upside), based on 20x Dec-27E PER (in line with the LTA). STL has been through a deep capacity build-out phase (over FY21-25) via both organic and inorganic routes. We believe STL is now ready to reap the benefits of its past investments, with the peak-capex phase now behind (capex intensity to moderate to ~4.5-5% of revenue over FY26E-28E vs ~9% average during FY21-25). This is led by its widening ADC portfolio (~5x domestic revenue over 5Y), scale-up of sheet-metal segment (3.5x revenue over 5Y), premiumizationled growth in smart locks (~10x ASP potential vs mechanical), and incubated EV portfolio, with revenue already flowing in (Rs69mn - H1FY26). Also, early signs of recovery in the overseas portfolio (Q2 losses halved vs Q1; targets breakeven by Q4) and a profitable JV footprint (all 5 JVs PAT-positive since FY24) have reduced the drag.
OutlookWe model in 14/20/22% revenue/EBITDA/EPS CAGR over FY26E-28E. STL trades at 12x its Dec-27E PER and at 54% discount to peer average (~26x), offering an attractive risk reward.
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