East India Securities' research report on Suprajit Engineering
An exceptional operational beat, while PAT impacted due to impairment provision for Wescon of Rs ~166mn. Also, provision of Rs ~109mn (~10% of invested amount) was created on its investments. Yearly performance was commendable looking at subdued auto industry performance. For FY21, we expect a poor demand from Indian OEMs, while incremental growth to come from the combination of aftermarket, exports and an increase in the content per vehicle. Major Global OEMs plans to de-risk from China & results are already visible in the strong export pipeline of Suprajit Engineering (SEL). The management is fully geared up to provide the required focus for its strategically important SENA strategy, while Phoenix Lamps incremental growth will majorly come from Osram’s orders and aftermarket. Stringent cost rationalisation measures, softness in commodity prices, better product mix and strong aftermarket to provide required support to the margins. We believe SEL would maintain its dominant leadership and has enormous growth potential in all of its three segments in the domestic as well as exports. Maintain Buy.
We have assigned 16x (~30% discount to its 1-year forward PE due to near term uncertainty) to its FY22e EPS of Rs 9.7 to arrive at a target price of Rs 156. Hence, we maintain ‘Buy’.