Suprajit Engineering Ltd. share price target

Q4 consolidated EBITDA was 8%/17% ahead of our/consensus estimate on strong standalone/ Wescon performance.

Suprajit Engineerings (SEL) consolidated 4QFY17 results were a strong beat, with robust performance of SELs cable business. PLLs performance was weak owing to absence of sale of H7 bulbs.

Suprajit has consistently outperformed auto ancillary pack on revenue/ EBITDA CAGR over the past decade while maintaining RoCE at ~30%. With current utilization levels below 65% across product lines, the company is well-placed to capitalize on growth opportunities over the next 2-3 years.

Suprajit Engineering Ltd: Leadership maintained in domestic auto industry, Suprajit 2.0 The transformation, De-riskingthebusiness

Suprajit Engineerings (SEL) consolidated 3QFY17 results came in below expectations owing to the weak performance of its cable business (effect of demonetisation) and a seasonally weak quarter for Wescon Controls. APAT came in lower than estimates at Rs 213mn ( 7% YoY), largely driven by a lower EBITDA margin at 15.3% (-120 bps YoY).

Consolidated sales recorded a growth rate of 10.7%/7.3% QoQ/YoY during Q2FY17 standing at Rs. 2816Mn and EBITDA improved by 14.2%/14.8% QoQ/YoY during this quarter where EBITDA margins worked out to be 16.6%, up by 51bps and 109bps as compared to Q1FY17 and Q2FY16 respectively due to raw material price cuts. PAT increased by 36.2%/ 53.6% in QoQ/YoY driven by revenue growth and gain in current investments.

Suprajit Engineering (SEL) has a enviable track record of reporting robust (20% ) revenue/APAT CAGR over the past decade further complemented by best-in-class RoCEs (30% ) driven by customer diversification, prudent cost control, market share gain and high capital efficiency.

Suprajit's Q2 consolidated EBITDA was 5% lower than estimate,as strong standalone performance was offset by 18% YoY decline in Phoenix Lamps' revenue. Suprajit has started consolidating Wescon Controls, USA (20 days during the quarter) and it will aid profitability (~17% margin) and further dive..