Buy Sundram Fasteners: target of Rs 1030: Sharekhan

Sharekhan is bullish on Sundram Fasteners has recommended buy rating on the stock with a target price of Rs 1030 in its research report dated April 22, 2022.

Broker Research

April 25, 2022 / 10:56 PM IST

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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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.

Outlook

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.