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Significant results beat

Sundram Fasteners reported a strong result beat with consolidated PAT of Rs 1.4bn (+37% YoY), which is at a record high. The performance was driven by healthy top-line growth as the company benefitted from its diversified portfolio across domestic and overseas markets. The company passed on partial price hikes to customers. We raise our estimates by ~8% over FY22-23 to factor in the results and maintain our ADD rating with a target price of Rs 630 at 27x FY23E EPS. We recommend accumulating the stock on declines.

* 3QFY21 financials: (1) Standalone: Revenue at Rs 9.4bn grew by 36/23% YoY/QoQ. This strong growth was driven by 43% YoY rise in the domestic market (Rs 6.4bn) and 24% in the export markets (Rs 2.8bn). Despite rising commodity prices, EBITDA margin at 21.5% expanded 475/50bps as the firm passed on price hikes. PAT at Rs 1.24bn grew 21/28% YoY/QoQ, driven by lower interest costs. (2) Consolidated: Revenue from subsidiaries grew 28% YoY, which led to a growth of 35/25% YoY/QoQ in the consolidated revenue. Revenue came in at Rs 11bn. EBITDA margin expanded 540/70bps to 20.8%. Adj. PAT at Rs 1.42bn grew 37/39%.

* Key highlights: (1) Growth driven by broad-based segment mix: Sundram has benefitted from its presence in multiple segments. In particular, the tractor segment outperformed in 3QFY21, while in passenger cars, the company benefitted from rising supplies to Maruti and Hyundai. (2) Exports: While exports grew 24% YoY, the contribution from overseas shipments dropped to 29% vs ~36% in FY20, due to the strong domestic segment sales. (3) Commodity cost pressures: To counter the impact of rising input prices, the company has taken a price hike of ~4-5%. While Sundram is passing on cost inflation to customers, the margins are likely to moderate from the elevated levels of 20%+.

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