Sansera Engineering Ltd. share price target

We recently visited various facilities of Sansera Engineering (SEL) and interacted with the senior management to understand their business strategy and outlook. Following are the key takeaways: a) SEL is aiming towards ~Rs35bn revenue by FY25 vs Rs23bn in FY23 with growth being driven by domestic 2W demand revival, return of growth in export markets and expansion of the aerospace segment.

Sansera Engineering’s (SEL) Q4FY23 EBITDA margin at 15.3% was down ~30bps QoQ, and lower than consensus estimate of 17%, due to higher RM costs and ~100bps impact of one-time year-end adjustments including inventory provisions and customer related costs.

Sansera Engineering’s (SEL) earnings remained hovered around Rs400mn/quarter throughout FY22-FY23 due to weak demand from domestic 2Ws / export markets impacting earnings growth. We interacted with the management to understand their outlook on business and their plans.

Sansera Engineering’s (SEL) Q3FY23 EBITDAM came in at 15.6%, impacted by 12% QoQ revenue decline despite a 200bps higher gross margin (GM) QoQ. GMn recovery was led by reversal of the optical effect of falling input commodity costs, which got passed along with better export mix.

We interacted with Sansera Engineering (SEL) management to understand the outlook on its business and its plans.

Sansera Engineering’s (SEL) Q2FY23 EBITDA margin at 16.8% was a tad lower than our estimate of 17.2%, with gross margin (GM) down ~400bps QoQ, though was supported by strong operating leverage benefits.

Sansera Engineering’s (SEL) Q1FY23 operating performance was slightly below our estimate as revenue (down ~8% QoQ) was impacted by weak exports, though EBITDAM beat our estimate at 17%, up ~60bps QoQ.

We recently interacted with the management of Sansera Engineering (SEL) for investor meetings. Key takeaways from the meetings are recent order win of Rs300mn p.a. (10-year order) from BMW Motorrad, which would start getting executed FY24E onwards, with scope of fresh orders from the same customer.