Supra­jit En­gi­neer­ing Ltd: Col­or­ful lamp

Money Times - - News -

(BSE Code: 532509) (CMP: Rs.233) (FV: Re.1)

Supra­jit En­gi­neer­ing Ltd (SEL) is one of the largest man­u­fac­tur­ers of au­to­mo­tive ca­bles in In­dia with a ca­pac­ity of 150+ mil­lion ca­bles a year and a turnover of over $160 mil­lion. It is a ma­jor ex­porter of non-au­to­mo­tive con­trol ca­bles and push-pull ca­bles to some of the world's lead­ing man­u­fac­tur­ers. Cur­rently, it caters to a wide spec­trum of au­to­mo­tive and non-au­to­mo­tive ca­ble re­quire­ments. It has ~65-70% mar­ket share in the two-wheeler seg­ment and so does Phoenix Lamps, which it ac­quired from the pri­vate eq­uity gi­ant Ac­tis in 2015.

SEL is a cus­tomer-cen­tric com­pany that takes chal­leng­ing prod­uct de­vel­op­ment and man­u­fac­tures a wide range of con­trol ca­bles and in­stru­ments that meet in­ter­na­tional spec­i­fi­ca­tions. In 1987, it started man­u­fac­tur­ing high qual­ity liner ca­bles for the au­to­mo­tive in­dus­try that match Ja­panese stan­dards. Its re­cent ac­qui­si­tion of US-based Wescon Con­trols, a lead­ing man­u­fac­turer of con­trol ca­bles in out­door power equip­ment space with prof­itabil­ity of $44.4 mil­lion, will boost its rev­enue, in­crease its pres­ence in USA and pro­vide cross-sell­ing op­por­tu­ni­ties. SEL con­tin­ues to fo­cus on grow­ing its orig­i­nal equip­ment man­u­fac­turer (OEM) busi­ness, make in­roads in the af­ter­mar­ket busi­nesses, in­crease its pres­ence in the non-au­to­mo­tive sec­tor and ex­pand its busi­ness in the au­to­mo­tive ex­port mar­kets. Dur­ing Q1FY19, it re­ported 5% higher in­come of Rs.361.75 crore with 27% higher PAT of Rs.28.81 crore. Is­sues of pre­mium car H7 bulbs and its new de­sign and ma­chin­ery im­ports have been re­solved and its lamps busi­ness uti­liza­tion has ramped up to 40%.

SEL’s strate­gic ac­qui­si­tions (Phoenix and Wescon) cou­pled with its grow­ing and prof­itable do­mes­tic ca­ble busi­ness, ex­pan­sion plans, op­er­a­tional ef­fi­cien­cies and high div­i­dend pay­out, low eq­uity with low debt-eq­uity ra­tio, ex­cel­lent as­set turnover ra­tios, ex­cep­tional RoCE, ro­bust sales growth and de­cent mar­gins makes the stock at­trac­tive. Buy on dips for dou­ble-digit re­turns as we ex­pect it to achieve a turnover of Rs.1650 crore in FY19 with profit of over Rs.125 crore.

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