HDFC Securities is bullish on Suprajit Engineering has recommended buy rating on the stock with a target price of Rs 289 in its research report dated August 16, 2018.
HDFC Securities' research report on Suprajit Engineering
Suprajit Engineering (SEL) consol EBITDA and PAT numbers were slightly below estimates in 1Q. Net sales at Rs. 3.6bn (+12% YoY) led by 19% growth in core automotive cable business, offset by muted growth in Phoenix (+4% YoY) and Wescon business(+4% YoY). Consol EBITDA rose 21% YoY at Rs. 554mn with margin at 15.3% (+107bps YoY/-275 bps QoQ). Operating margin for PLL recovered 490 bps YoY to 15% on cost cutting initiatives while Wescon margin contracted by 130bps. APAT stood at Rs 288mn (+27% YoY).
SEL has a proven track record of prudent capital allocation across its organic and inorganic capacities and requirements, reflecting in strong return ratios (average ROE of 21% over the last five years). Although revenue growth for PLL is still muted (slow ramp up in H7 line), improvement is EBITDA margin augurs well for the company. We have cut EPS estimate by 2/3% for FY19/20 factoring in 1Q performance.Expect revenue/EPS CAGR of 18/21% over FY18-20E. We value the stock Rs. 289 (20xFY20E EPS) vs 296 earlier. Maintain BUY.
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