Antique Stock Broking has initiated coverage on Suprajit Engineering with a ‘buy’ rating and a target price of Rs 459 on the stock, implying an upside potential of 17 percent from the high of August 28 when it rallied over 3 percent intraday.
According to the brokerage firm, Suprajit Engineering is projected to achieve a compounded annual growth rate of 11 percent in revenue and 26 percent in EBITDA between FY23 and FY25. This strong performance is anticipated to outpace the growth of auto OEMs, driven by growing momentum in Light Duty Cables (LDC), exports, aftermarket activities, and the non-automotive sector.
At 1:47pm, shares of the company traded 2.5 percent higher at Rs 392.05 on the BSE.
The brokerage firm has valued the stock at 22 times its FY25 earnings per share (EPS). It is optimistic about Suprajit Engineering for several reasons.
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First, as the industry rebounds, the company’s strong position in two-wheelers with approximately 75 percent market share and four-wheelers with around 32 percent market share, is advantageous. Second, collaboration with the LDC business unit of Kongsberg Automotive is expected to attract new clients and broaden the product range.
Third, the introduction of new products will enhance per-vehicle content, and fourth, the potential recovery of the non-auto segment and expansion of the product portfolio will contribute positively. Lastly, the benefits of scale and production in India enable Suprajit Engineering to maintain cost leadership compared to global peers, the brokerage firm added.
The company maintains a strong free cash flow generating model with nominal capex requirements along with a minimal net debt balance sheet, the brokerage firm highlighted.
The company has consistently surpassed industry growth for the past 11 years, driven by both organic and inorganic expansions. Looking forward, Antique Stock Broking sees substantial growth potential through portfolio expansion, non-automotive ventures, and increased market share in the domestic aftermarket.
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