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* Surya Roshni (formerly known as Prakash Surya Roshni Ltd) was founded by Mr. J. P. Agarwal, started with steel pipe manufacturing in 1973. It commenced operations with a tube-making unit at Bahadurgarh, Haryana. The company started its lighting business in 1984, PVC pipes business in 2010 and consumer durables business in mid of 2014-15.

* The company operates the steel business through its manufacturing units across Haryana, Gujarat, Madhya Pradesh and Andhra Pradesh. It also has a presence in the Middle East, Europe, Africa and Asia. SYR caters to several industries including oil & gas, infrastructure and water transport, with oil & gas contributing the highest. Its oil & gas sector product offerings are approved by the American Petroleum Institute (API). With a total capacity of 1.24mt, it now offers a wide range of products like GI pipes, API coated pipes, spiral pipes, structural pipes and cold rolled strips, catering to industries like oil & gas, water transmission and roads & highways. Under lighting, it offers GLS, CFL, LED and other luminaire products. Other consumer durables offered by the company include home appliances, fans and PVC pipes.

* The lighting division was initiated in the year 1984 with the first unit in Kashipur, Uttarakhand. Currently, it manufactures lighting products at Kashipur, UK and Gwalior, MP facilities, churning out 90 million pieces of LED bulbs, 3.6 million pieces of LED street lights, 10 million pieces of LED tubes & fittings and 200 million pieces of GLS annually. It also has an in-house R&D center at Noida – known as Surya Technology and Innovation Center (STIC).

* The company has an established brands labelled as Surya and Prakash Surya with healthy financial prospects. Moreover, it also has an dominant market position in the domestic electric resistance welded (ERW) pipes industry, led by geographically diversified manufacturing base and a pan-India distribution network. With the help of superior track record of business from a diversified client base, these strengths have facilitated healthy utilization of its installed capacities, over the years. Further, these strengths have enabled the company to grow at a healthy pace, reflected in a compounded average growth rate of over 13% in its total revenues from FY17-FY22)

* Despite Covid-19 pandemic, company’s EBITDA margin remain intact to 7% which depicts its operational efficiency and command over its pricing power. Also, Surya is the largest GI pipe manufacturer in India and second largest player in Lighting with a robust track record. We forecast its EPS to grow at CAGR of 27% over FY22-24E and ROE to improve to 15% in FY24 (average 10% over FY16-FY22). Going ahead, we expect the company to continue its strong growth trajectory with its Revenue/EBITDA/PAT growing at a CAGR of 10%/21%/35% respectively over FY22 to FY24E with continuous improvement in margins and return ratios. On the valuation front, at current CMP Rs 713, the stock trades at 10.4x FY24E EPS. We initiate the coverage with a “BUY” rating and value the company based on 12.5x of FY24E earnings (average P/E of last 5 year) with a target price of Rs 860 (21% upside from current level).

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