Buy Suprajit Engineering; target of Rs 315: Axis Direct
Axis Direct’s research report on Suprajit Engineering
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. The next leg of growth is likely to be driven by (1) share gain in global non-auto cables; (2) increase in content supplied (CBS opportunity) to domestic OEMs; (3) recovery in aftermarket (both lamps and cables).
Suprajit has consistently outperformed the auto pack on revenue/EBITDA CAGR over the past decade while maintaining RoCE at ~30%. With transitory impact of GST behind us, the company is well placed to capitalize on growth opportunities (insignificant capex over next 2 years). Reiterate BUY with a target price of Rs 315 (22x FY19E EPS; 10% higher on FY20 CBS opportunity).
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