Buy Sansera Engineering Ltd For Target Rs. 1,580 By Axis Securities Ltd
Est. Vs. Actual for Q4FY25: Revenue – INLINE; EBITDA – MISS; PAT – INLINE
Change in Estimates post Q4FY25
FY26E/FY27E: Revenue: 1.3%/2.3%; EBITDA: 1.3%/2.3%; PAT: 7.7%/6.5%.
Recommendation Rationale
Revenue and EBITDA Margins: Despite a challenging FY25 due to geopolitical headwinds, Sansera expects to report high-teen revenue growth in FY26, supported by continued strength in xEV, ADS, and overseas businesses. The management has guided a 50–60 bps expansion in EBITDA margins, driven by better product mix (more tech-agnostic, EV, and ADS), favourable operating leverage, and reduced dependency on commodity-heavy ICE components.
Robust Order Book: As of Mar’25, Sansera’s total unexecuted order book stood at Rs 1,851 Cr, with a diversified mix across geographies and end segments. Notably, 28% of the new orders originated from the ADS segment, highlighting the growing relevance of this business line. Geographically, 27% of the order book is linked to North America, 24% to Europe, and 9% to other Asian countries.
Capex to Support Orderbook: Sansera is executing both brownfield and greenfield expansions to support its long-term growth strategy. In FY25, the company incurred a capex of Rs 591 Cr, largely towards enhancing capacity in machining, forging, and the ADS facility. Additionally, it acquired 55 acres of land in Karnataka for future greenfield expansion, expected to begin post FY27. These investments are to meet the growing demand from high-content EV products and aerospace-defence applications.
Sector Outlook: Positive
Company Outlook & Guidance: The company is driving manufacturing growth and strengthening its position as a key exporter, creating more opportunities within the auto-component sector. It has visible growth in xEV, Tech Agnostic, and Non-Auto products, supported by a strong order book and an increasing contribution to overall sales.
Current Valuation: 27x PE FY27EPS (Earlier 25x).
Current TP: Rs 1,580/share ( Earlier TP: Rs 1,430/share).
Recommendation: We maintain our BUY rating on the stock.
Financial Performance
Sansera's consolidated revenue was in line, up 5%/7% YoY/QoQ. However, EBITDA missed estimates by 7.5%, remaining flat YoY/QoQ. The shortfall was primarily due to higher raw material costs, which were partly offset by lower employee costs as a percentage of sales. The EBITDA margin stood at 16.3%, down 78/121 bps YoY/QoQ. PAT was in line, increased by 28.8%/7.4% YoY/QoQ, driven by higher other income and lower interest expenses.
Outlook
Given factors such as a) A higher sales mix in Non-Auto ICE components, b) Increased premiumisation trend, c) A focused approach on improving margin trends, d) Strong ability to generate operating cash flows, and e) Capacity expansion plans, we expect Revenue, EBITDA, and PAT to grow at CAGR of 17%, 21%, and 30%, respectively, over FY25-27E.
Valuation & Recommendation
Given Sansera’s 40 years of expertise, diversified business model, and strong engineering capabilities, we maintain our BUY rating on the stock. We assign a 12-month forward PE multiple of 27x on FY27 EPS (earlier 25x) to arrive at a TP of Rs 1,580/share, implying an upside of 18% from the CMP.
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SEBI Registration number is INZ000161633
