Suprajit Engineering Ltd. share price target

Expect revenue/EPS CAGR of 18/23% over FY18-20E. We value the stock Rs. 296(20xFY20E EPS). Maintain NEU Suprajit Engineering (SEL) consol 4QFY18 Rev/EBITDA/PAT numbers were below estimates but margin beat estimates. Net sales at Rs. 4.06bn (+13% YoY) led by 18% growth in standalone cable business, and +9% growth in Wescon business marginally offset by muted growth in Phoenix (flat YoY). Consol EBITDA stood at Rs. 734mn (+13% YoY) with margin at 18.1% (flat YoY, +219bps QoQ). Margin recovered sequentially led by 257bps margin improvement by Phoenix and strong margin of Wescon.

Suprajit Engineering (SEL) reported 4QFY18 revenues of INR 4.1bn (+13% YoY, +11% QoQ), driven by increase in aftermarket lamp business and domestic OE cable business, in line with increase in domestic 2W and 4W sales. Consol. EBITDA margin stood at 18.1% (flat YoY, +170bps QoQ), driven by higher sales of H7 lamps during 4QFY18. Capacity utilization at H7 line improved during 2HFY18 to c.40% (vs 25%, 2HFY17). Phoenix Lamps (PLD) EBITDA margin at 14% (FY18) was flat YoY, despite good aftermarket business as export subsidiaries (Luxlite and Trifa) faced headwinds in gaining back key customers and difficulty in passing-on raw material prices to OEs. After two years of no growth, management expects PLD to grow...

Q3FY18 consolidated EBITDA came in at Rs 582 mn (+22% YoY, +4% QoQ), 5% below est. on lower profitability at Wescon. Management on call reiterated it will continue to outperform industry growth by 5-10%, led by market share gains and increase in content supplied.

We roll forward our TP on FY20 and value the stock Rs. 296(20xFY20E EPS) vs 305 earlier. Maintain NEU Suprajit Engineering (SEL) consol 3QFY18 EBITDA and PAT numbers were slightly below estimates. Net sales at Rs. 3.66bn (+18% YoY) led by 28% growth in cable business, offset by muted growth in Phoenix (+2% YoY) and Wescon business(+10% YoY). Consol EBITDA stood at Rs. 582mn (+18% YoY) with margin at 15.9 % (flat YoY, -75bps QoQ). Margin contracted 75bps sequentially led by margin pressure in cable business (-73bps YoY) and Wescon(-33 bps YoY), offset by 120bps margin improvement by Phoenix.

Revenue for 9MFY18 recorded Rs. 10247 Mn, up by 21.6% YoY, higher than theautomobile industry growth of 11.3% YoY during 9MFY18. The industry size for cables and lamps in the domestic market is quite vast, given that ~ 20 Mn vehicles are being added annually, so we believe that there is a sizeable opportunity for the company to expand its presence across all automotive segments.

Q2FY18 consolidated EBITDA was in line with our estimate. Aftermarket revenue (~20% of sales) remained subdued in the wake of GST implementation and the management expects recovery in H2.

Maintain NEU with TP of Rs 305 (20x SEL's consol Sept-19E EPS). Suprajit Engineerings (SEL) consol 2QFY18 result was in-line with estimates. Net sales came in at Rs 3.36bn (+19%YoY), led by 8% growth in the standalone business, 7% growth in PLLs business and incremental revenue of Rs 513mn from Wescon. Consol EBITDA was at Rs 560mn (+19.4% YoY), with margin at 16.6% (flat YoY, +238bps QoQ), led by expansion in margins in the standalone business (+100bps YoY).

Q1FY18 consolidated EBITDA was below consensus and our estimates due to higher-than-expected impact of GST implementation on aftermarket revenue. The next leg of growth is likely to be driven by (1) gaining share in global auto and non-auto cables (including inorganic)

Maintain NEU with a revised TP of Rs 306 (20x SEL's consol Jun-19E EPS) Suprajit Engineerings (SEL) consolidated 1QFY18 result came in below estimates, with PAT at Rs 226mn (+7% YoY), led by lower operating efficiencies. Revenue witnessed a jump of 27% YoY to Rs 3.2bn, while EBIDTA margin contracted sharply to 14.3% (-290bps YoY, -360bps QoQ).