DART Research | Suprajit Engineering - Q1FY21 Result Update (Accumulate)
nirav shah
Suprajit Engineering – Q1FY21 Result Update (Accumulate
CMP: Rs 181 (Upside 14%) Market Cap: Rs 25bn
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On a recovery path
§ Surpajit Engineering reported decent numbers amid tough market conditions. Revenue for Q1FY21 de-grew by 51% YoY to Rs. 1.77bn due to production cuts taken by various OEMs owing to lockdown. EBITDA turned negative to Rs. 48mn (vs estimated loss Rs 100mn).
§ Phoenix lighting revenue de-grew 49% YoY to Rs 337.3mn while SENA division (non-automotive cable) numbers beat estimates, benefited from temporary supply disruption of its one of competitors. Revenue de-grew 24% YoY to Rs 632.9mn while the company was able to manage a positive margin at 6.3%.
§ Management stated that outlook for Q2 is promising with domestic OEM sales back to 90-95% of pre-Covid level. Strong traction was witnessed in the aftermarket demand with growth reported in the months of June and July on a YoY basis. At Wescon, July and August volumes are back to last years’ level with pickup in demand.
§ The company has undertaken various cost optimization measures, such as reduction in employee expense and improving efficiencies to minimize the impact of Covid-19. Gross debt was at a comfortable level at Rs 3.54bn at Q1FY21 end (vs Rs 3.8bn at FY20 end), with a Net D/E ratio of 0.3x.
§ As 2W and the replacement segment together contribute about 65% of overall sales for SEL, we see a quicker recovery in the business after the lockdown is over. We believe recovery in 2W domestic demand, capacity expansion in the cables business (250mn to 300mn cables), increase in content per vehicle, addition of new clients, and new product development in the non-automotive business will potentially support growth in the medium term.
§ At CMP, the stock is available at 20/16x of FY22E/FY23EPS, which is lower than its historical mean of 22x. We recommend to Accumulate with TP of Rs 207 (18x FY23E EPS).
Q1FY21 Result (Rs Mn)
Particulars | Q1FY21 | Q1FY20 | YoY (%) | Q4FY20 | QoQ (%) |
Revenue | 1,775 | 3,634 | (51.2) | 3,890 | (54.4) |
Total Expense | 1,823 | 3,121 | (41.6) | 3,341 | (45.4) |
EBITDA | (48) | 513 | (109.4) | 549 | (108.8) |
Depreciation | 138 | 128 | 7.3 | 145 | (4.9) |
EBIT | (186) | 385 | (148.3) | 405 | (145.9) |
Other Income | 58 | 61 | (6.0) | 42 | 36.4 |
Interest | 55 | 66 | (16.0) | 57 | (3.8) |
EBT | (183) | 380 | (148.2) | 115 | (258.9) |
Tax | (38) | 132 | (128.9) | 86 | (144.5) |
RPAT | (145) | 248 | (158.4) | 30 | (588.4) |
APAT | (145) | 248 | (158.4) | 304 | (147.7) |
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| (bps) |
| (bps) |
Gross Margin (%) | 44.4 | 43.0 | 144 | 41.3 | 307 |
EBITDA Margin (%) | (2.7) | 14.1 | (1683) | 14.1 | (1684) |
NPM (%) | (8.2) | 6.8 | (1501) | 0.8 | (894) |
Tax Rate (%) | 20.8 | 34.7 | (1388) | 74.2 | (5342) |
EBIT Margin (%) | (10.5) | 10.6 | (2106) | 10.4 | (2088) |
Regards,
Abhishek Jain / Kripashankar Maurya
Analyst / Associate
Ph: +9122 4096 9739 / 4096 9741 (B) +9122 4096 9700
Email: abhi...@dolatcapital.com / kripas...@dolatcapital.com
Dolat Capital Market Pvt. Ltd.
Sunshine Tower, 28th Floor,
Senapati Bapat Marg, Dadar (W), Mumbai 400 013.
