Buy SJS Enterprises Ltd for the Target Rs 2,800 by Emkay Global Financial Services Ltd
SJS posted a strong 1Q, with revenue growing ~25% yoy, led by robust growth across subsidiaries (WPI/Decoplast up 33%/38% yoy). EBITDA/APAT grew 34% yoy, with EBITDA beating our estimate by ~7%, aided by resilient gross margins despite commodity headwinds. SJS reiterated its guidance of 1.5–2x outperformance vs industry in FY27 while maintaining ~27–28% EBITDAM, led by strong order wins (new wins from TMPV, M&M, TVSL, HMCL, MSIL, EIM RE), SJS Decoplast (SDL) ramp-up (targets 2x revenue in 3-4Y aided by the new plant), export momentum (targets ~14-15% of revenue by FY28 vs 10% now), and increasing CPV. Display/cover glass commercialization remains on track for 2QFY28, with an aspiration to capture ~10% of the domestic automotive display market (Rs50-70bn market size in FY30 vs Rs5-10bn now) by FY30. We raise FY27/28E EPS by ~18%/11%, reflecting stronger-than-expected growth and profitability in subsidiaries. We also factor in a gradual moderation in consolidated margin over FY28-29E as the display business scales up (lower margins initially). We raise our TP by 17% (~7% due to roll-forward to Jun28E, with BOE TLA ramping up in FY29E) to Rs2,800 (from Rs2,400), based on 30x Jun-28E PER. Retain BUY (Refer to IC: One-stop aesthetics champion).
An overall strong operational quarter
SJS posted strong revenue growth (~25% yoy), in line with our estimate, mainly owing to robust subsidiary growth (WPI/SJS Decoplast revenue up 33/38% yoy). Consolidated EBITDA was at Rs747mn (up 34% yoy; ~10/7% beat vs our/street estimates), owing to flattish sequential gross margin (decline expected). APAT was at Rs462mn (up 34% yoy)
Earnings call KTAs
1) SJS reiterated its target of outperforming the automotive industry by 1.5x–2.0x in FY27, driven by both higher content growth and continued market share gains.
2) It secured multiple new business wins from leading domestic/global OEMs, including TMPV, M&M, TVSL, HMCL, MSIL, RE, Ather, Skoda, Autoliv, and John Deere.
3) SJS reiterated its objective of increasing export contribution to ~14–15% of revenue by FY28 (vs ~10% now), with growth led by onboarding new global customers, expanding premium offerings, and leveraging WPI’s global customer relationships.
4) The Board has approved the incorporation of a wholly owned subsidiary dedicated to the display and cover glass business with equipment already ordered and commercial operations to begin from 2QFY28 (~10% market share targeted by FY30 with an estimated market size of ~Rs50- 70bn).
5) Commodity inflation impacted margins by ~50–60bps; however, EBITDAM guidance of ~27-28% remains unchanged, led by new tech products entering production, richer product mix, premiumization, and operational efficiency gains.
6) The management remains optimistic on SDL’s future growth prospects (expects ~Rs2–2.5bn of incremental revenue over next 3Y; the new Pune facility is expected to generate ~2- 2.5x asset turns once operations stabilize).
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