Emkay Global Financial's research report on Suprajit Engineering
Suprajit Engineering’s Q2FY23 revenue increased by 45% (3-yr CAGR at 22%) to Rs7.2bn, slightly above our estimates, due to higher revenue in non-auto cable and LDC segments. EBITDA declined by 2% YoY (3-yr CAGR at 12%) to Rs787mn, 7% above our estimate due to higher profitability across segments. Management expects further margin expansion on price increases, commodity deflation, and turnaround in LDC. Going forward, we expect FY23E revenue growth to be robust at 53%. The uptrend is likely to endure with FY23-25E revenue CAGR at 12%, led by healthy growth in underlying segments and better wallet share. EBITDA margin is likely to contract from 14.1% in FY22 to 11.1% in FY23, owing to LDC’s acquisition, and then recover to 14.8% in FY25E, driven by better scale, improved net pricing, and expansion of LDC’s margins. We maintain a constructive view, driven by: 1) cyclical recovery in the underlying industry; 2) market-share gains vs. the industry, thanks to decentralized plant locations and competitive pricing owing to scale advantages; and 3) growth in content per vehicle (CPV), led by new products (~Rs50,000/unit opportunity).
We reaffirm our BUY rating on the stock with a TP of Rs450 (Rs440 earlier), based on 20x Dec-24E EPS (Sep-24E earlier).
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