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Engineering Growth!
Suprajit Engineering promoted by Mr Ajith Kumar Rai manufactures control cables,
speedometer cables, speedometers etc for two wheelers and four wheeler industry. It
also manufactures cables for non automotives and for replacement market. SEL commands
45% market share in the two wheeler segment and 35% market share in the
four wheeler segment. The company’s current installed capacity is 110 Mn cables p.a.
operating at 80% utilization.
Suprajit has grown at a CAGR of 19% during FY09-FY11. We expect it to grow by 20%
and 25% in FY12E and FY13E respectively, on the back of capacity expansion and addition
of new customers in the non automotive space. It is trading at 6.7 and 5.1 times its
FY12 and FY13 estimated EPS. We have valued Suprajit 7.5 times its FY13 EPS arriving
at a fair value of Rs 30 an upside potential of 47% from current levels.
Strong market share – Suprajit commands 45% market share in two wheeler segment
and 35% in the four wheeler segment. It is a sole supplier to TVS and 80% of
the cable requirements of Bajaj and Hero Moto is met by Suprajit.
Capacity Expansion to boost revenues – The company’s total current capacity is
around 110 Mn cables p.a. operating at 80% capacity utilization. By Dec 2012, the
company will be adding another 40 Mn cable capacity which will boost its topline
going forward.
Addition of new customers – Suprajit added new customers like Volkswagen for
Polo in India, BMW for Germany & Europe, Nissan, Palio, Arvin Meritor and Brozer
(Germany). In the non automotive space customers like John Deere, Kubota, Club
Car, JCB etc. will help in the next phase of volume growth.
Growth in high margin non automotive and replacement market – Suprajit is growing
quite aggressively in the non automotive and replacement market segment
where the margins are also higher as compared to automotive segment. In the non
automotive segment the company commands 18% operating margins and in replacement
market it enjoys 5% higher margins than in automotive space.
Strategic locations of plants - Suprajit has set up manufacturing facility at 8 different
locations across the country to be close to its main customers in the North, West
and Southern belts. Haridwar plant next to Hero Honda, Pantnagar plant next to
Bajaj, the planned Sanand plant next to Tata Nano, etc. which gives Suprajit a logistic
advantage.
Elite Clientele – In the two wheeler space the company’s major customers are TVS,
Bajaj Auto and Hero Moto. In the four wheeler segment the company’s customers
are Tata Motors, Mahindra and Mahindra, Hyundai, Ford and General Motors. Major
exports customers are General Motors, Suzuki and Piaggio.
We expect revenues to grow by 20% in
FY12E and by 25% in FY13E on the back of capacity
expansion and addition of new customers.
We expect replacement market to contribute
12% of the revenues in FY12 and 7% revenue
share in the non automotive space.
The company will be able to sustain the operating
margins at ~16.5% in FY12. In FY13 we
can see an uptick in operating margins on the
back of improvement in revenue share of non
automotive and replacement market segment.
With positive free cash flows the company
would be able to meet its capex requirements
without straining the balance sheet with a sustainable
debt equity level of 0.7:1
Improvement in earnings would lead to RoE
over 30%
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Engineering Growth!
Suprajit Engineering promoted by Mr Ajith Kumar Rai manufactures control cables,
speedometer cables, speedometers etc for two wheelers and four wheeler industry. It
also manufactures cables for non automotives and for replacement market. SEL commands
45% market share in the two wheeler segment and 35% market share in the
four wheeler segment. The company’s current installed capacity is 110 Mn cables p.a.
operating at 80% utilization.
Suprajit has grown at a CAGR of 19% during FY09-FY11. We expect it to grow by 20%
and 25% in FY12E and FY13E respectively, on the back of capacity expansion and addition
of new customers in the non automotive space. It is trading at 6.7 and 5.1 times its
FY12 and FY13 estimated EPS. We have valued Suprajit 7.5 times its FY13 EPS arriving
at a fair value of Rs 30 an upside potential of 47% from current levels.
Strong market share – Suprajit commands 45% market share in two wheeler segment
and 35% in the four wheeler segment. It is a sole supplier to TVS and 80% of
the cable requirements of Bajaj and Hero Moto is met by Suprajit.
Capacity Expansion to boost revenues – The company’s total current capacity is
around 110 Mn cables p.a. operating at 80% capacity utilization. By Dec 2012, the
company will be adding another 40 Mn cable capacity which will boost its topline
going forward.
Addition of new customers – Suprajit added new customers like Volkswagen for
Polo in India, BMW for Germany & Europe, Nissan, Palio, Arvin Meritor and Brozer
(Germany). In the non automotive space customers like John Deere, Kubota, Club
Car, JCB etc. will help in the next phase of volume growth.
Growth in high margin non automotive and replacement market – Suprajit is growing
quite aggressively in the non automotive and replacement market segment
where the margins are also higher as compared to automotive segment. In the non
automotive segment the company commands 18% operating margins and in replacement
market it enjoys 5% higher margins than in automotive space.
Strategic locations of plants - Suprajit has set up manufacturing facility at 8 different
locations across the country to be close to its main customers in the North, West
and Southern belts. Haridwar plant next to Hero Honda, Pantnagar plant next to
Bajaj, the planned Sanand plant next to Tata Nano, etc. which gives Suprajit a logistic
advantage.
Elite Clientele – In the two wheeler space the company’s major customers are TVS,
Bajaj Auto and Hero Moto. In the four wheeler segment the company’s customers
are Tata Motors, Mahindra and Mahindra, Hyundai, Ford and General Motors. Major
exports customers are General Motors, Suzuki and Piaggio.
We expect revenues to grow by 20% in
FY12E and by 25% in FY13E on the back of capacity
expansion and addition of new customers.
We expect replacement market to contribute
12% of the revenues in FY12 and 7% revenue
share in the non automotive space.
The company will be able to sustain the operating
margins at ~16.5% in FY12. In FY13 we
can see an uptick in operating margins on the
back of improvement in revenue share of non
automotive and replacement market segment.
With positive free cash flows the company
would be able to meet its capex requirements
without straining the balance sheet with a sustainable
debt equity level of 0.7:1
Improvement in earnings would lead to RoE
over 30%
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