Sharekhan's research report on Sundram Fasteners
Q4FY2022 results missed estimates, driven by lower-than-expected EBITDA margin due to increased raw-material and logistics costs. Export and non-automotive segments remain the top focus areas for the management to de-risk business from cyclicality. We expect SFL’s earnings CAGR to improve by 38% during FY2022-FY2024E, driven by a 21.5% revenue CAGR and a 160-bps improvement in EBITDA margin to 17.9% in FY2024E from 16.3% in FY2022, with ROCE progressing to 24% in FY2024E. The stock trades at P/E multiple of 19.9x and EV/EBITDA multiple of 12.7x its FY2024E estimates.
We maintain Buy on Sundram Fasteners Limited (SFL) with a revised PT of Rs. 1,030, led by the company’s dominant position in the fasteners segment, diverse client base and product portfolios, established client relationships, and prudent capital allocation.
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