Sundram Fasteners Ltd. share price target

We maintain a Buy rating on the stock with an unchanged PT of Rs 1460 in expectation of traction in export revenue, expectation of new orders in the EV segment, successful execution of existing orders in EV and non-auto space.

We recently interacted with Sundram Fasteners (SFL) management for an update
on their business strategy and outlook. Following are the key takeaways: 1) company is aiming at its revenue CAGR to exceed that of the OEM industry.

Sundram Fasteners Limited (SFL), a part of $5 billion TVS Group is one of the leading auto component manufacturers in India which has been operational since 1966 headquartered in Chennai. SFL has grown into a global leader, manufacturing critical, high precision components for the automotive, infrastructure, windmill and aviation sectors. SFL's product range includes hightensile fasteners, cold extruded parts, hot forged components, powder metallurgy,...

SFL reported a steady set of Q1FY18 numbers with net sales up by 11% YoY to Rs 788.82 crs, with EBIDTA placed at Rs 156.32 crs from Rs 139.96 crs in Q1 last year. The PAT in Q1 FY18 grew by 19% YoY to Rs 90.17crs as compared to Rs 75.55 crs in Q1 last year. For FY17 the company has recorded net sales of Rs 3290 crs, a EBIDTA of Rs 596.2 crs and a PAT of Rs 341.15 crs from Rs 125.08 crs last year. SFL has paid a dividend of 450% for FY17...

Outlook The Indian Auto Component industry is expected to grow by 8-10 % in FY18. During FY13-17 SFL, operating income grew at CAGR of 7.4% due to increase in domestic and export sales while EBITDA grew at a CAGR of 22.4% over the same period. EBITDA margins of the company are consistently improving and stood at 16.9% in FY17 as compared to 10% in FY13, representing an expansion of around 7ppts. Margin expansion was primarily driven by the reduction in cost of raw material consumed and increased productivity. Cost of raw material increased at a lower rate as compared to the top-line by 0.8%, while employee expenses increased...

Buy Sundram Fasteners Ltd CMP at Rs. 187.7 and add on declines Rs. 160-168 for the Sequential Targets Rs. 215-240

Domestic business:: The Company generates ~60% of its sales from domestic business (CV ~22%, PV ~14%, 2W~ 10%, Tractor~ 5%, after sales ~10%). Its clients include Tata motors, M&M;, Ashok Leyland, Maruti, Cummins etc. It...