Sharekhan Retains Buy On This Mid Cap Automobiles Stock For Robust Return, Price Target Rs 386

Sharekhan has recommended buy call to the Mid Cap Automobiles Stock, Suprajit Engineering Ltd with a target price of Rs 386 apiece. The current market price of the stock is Rs 330 apiece. Suprajit Engineering Ltd.'s (SEL's) Q2FY23 results exceeded expectations, led by a sharp improvement in LDC biz's operational performance.

Revenue, EBITDA and PAT beat estimates by 4.7%, 27.8% and 30%, respectively. Check vital details below:

1. Suprajit Engineering Ltd Stock Performance

The current market price of the stock is Rs 330 apiece with 52-week high at Rs 478 apiece and 52-week low at Rs 272 apiece, respectively. The company has a market capitalisation of Rs 4567 crore.

2. Suprajit Engineering Key Positives

Q2FY23 results exceeded expectations, led by a sharp improvement in LDC biz's operational performance. Revenue, EBITDA and PAT beat estimates by 4.7%, 27.8% and 30%, respectively. The Company has largely passed on the cost increase to its customers globally. Consolidated EBITDA margins expanded 260bps q-o-q to 11%, led by improvement in operational performance of LDC biz.

3. Suprajit Engineering Key Negatives & Key Risks

In respect of the LDC biz, the company took price hikes in the non-auto space, while it continues to negotiate with auto clients for price increases. The management expects to conclude some price increase in Q3.

Chips supply shortage, rising commodity prices, and transportation constraints remain key concerns. Moreover, delayed approval from OEMs for incremental business may affect performance.

4. Suprajit Engineering Valuation

According to Sharkhan, "Propelled by a robust business outlook and prudent capital allocation, we expect Suprajit's earnings to report a 24.3% CAGR during FY2022-FY2024E, driven by a 27.2% revenue CAGR, partially offset by a 50 bps decline in EBITDA margins. The stock trades at a P/E multiple of 17.2x and EV/EBITDA multiples of 11.6x its FY24E estimates, which is trading below its historical average. We retain our Buy rating on the stock with an unchanged price target (PT) of Rs.386."

5. Suprajit Engineering About

Suprajit is a global leader in the automotive cable and halogen bulb industry. With a competitive manufacturing base in India, UK, US, and Mexico, along with technical and logistical supports worldwide, the company provides optimal product development and manufacturing solutions to its domestic and international customers.

With a CAGR of over 25%, Suprajit has one of the largest manufacturing capacities in the world with 300+ million cables per year and 110+ million bulbs per year. Suprajit is a well-diversified company deriving 60% of its revenue from global operations, while 40% is derived domestically.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.