Buy SJS Enterprises Ltd For Target Rs. 1,425 By JM Financial Services
Healthy quarter; Customer additions strengthen growth visibility
In 4QFY25, SJS Enterprises (SJS) continued to outperform the underlying automotive industry, with revenue growth of 7% YoY, slightly above our estimate. Consolidated EBITDA margin came-in at 25.4% (flat YoY), 40bps above JMFe. The management expects PV and 2W industry volumes to grow in mid and high-single digit, respectively, in FY26. Further, it believes SJS will outperform the industry growth by 2x, led by premiumisation, cross-selling opportunities, strong order book and a diversified customer base. The addition of HMCL comes with a massive potential business opportunity of ~INR 2.5bn, further strengthening its growth visibility. On the exports front, SJS does not anticipate tariff-related headwinds to impact its competitive positioning and aims to increase export revenue contribution to 14- 15% by FY28. We expect SJS’ growth trajectory to remain strong with an EPS CAGR of ~23% over FY25-27E. Maintain BUY rating with Mar’27 TP of INR 1,425 (25x Mar’27E EPS).
* 4QFY25 – Tad better than JMFe: SJS reported consolidated net sales of INR 2bn (+7% YoY, +12% QoQ), 2% ahead of our estimates. Consol. EBITDA margin came in at 25.4% (flat YoY & QoQ), 40bps above of JMFe. Consolidated EBITDA was INR 510mn (+7% YoY, +13% QoQ), 4% above JMFe. Consol. PAT came in at 377mn (+24%YoY, +22% QoQ), 15% above JMFe due to lower than expected finance cost and tax expense. Standalone: Revenue stood at INR 1bn (flat YoY) and EBITDA margin came in at 28.5% (+80bps YoY; -330bps QoQ).
* Demand outlook: SJS continued to outperform the underlying automotive industry in 4QFY25. Against industry growth of c.6% YoY, SJS’s automotive segment revenue rose by 9% YoY, driven primarily by early double-digit growth in the PV segment. The company onboarded HMCL as a new customer in Apr’25 and has commenced supplies of decals and logos. The total business potential from HMCL is estimated at ~INR 2.5bn, with SJS expecting to capture a significant share. Export revenue grew 17.6% YoY in FY25, primarily led by strong growth in PV segment. Management does not anticipate tariff-related headwinds to impact its competitive positioning and aims to increase export revenue contribution to 14-15% by FY28 (from 7.5% in FY25), supported by the addition of new customers and geographies. Overall, the management expects mid-single-digit volume growth in the PV industry and high-single-digit growth in the 2W industry in FY26. SJS aim to outperform the underlying industry growth by 2x, led by premiumisation, diversified customer base and strong order book.
* Margin outlook: Introduction of new technology-led products and operational efficiencies are expected to support the margins going forward.
* Capex and debt: FY26 capex guidance stands at INR 1.5bn (including INR 150-200mn of maintenance capex). This includes: 1) Capacity expansion at Exotech with SOP expected in 1HFY26 (total cost: INR 1bn; 700mn to be incurred FY26), 2) Cover glass facility at Hosur (investment of INR 400mn in FY26), and 3) Capex of INR ~450mn for SJS’ Bangalore plant. FCF for FY25 stood at INR 1.2bn and the company’s net cash stood at INR 992mn at 4QFY25’end (vs. INR 754mn at 3Q end). We transfer coverage to Saksham Kaushal.
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SEBI Registration Number is INM000010361
