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Suprajit Engineering (SEL) reported consolidated EBITDAM margin of 12.1% (+40bps YoY, +220bps QoQ), 110bps above JMFe led by better operating efficiencies. Restructuring at PLD has started yeilding results. Company indicated that new order wins for SCD and SED division remain healthy led by its strategy of ‘beyond cables products’. However, growth in nonautomotive cables segment is expected to remain muted in the near-term owing to weak demand in the end-markets. Near-term margin performance is expected to be supported by moderating commodity cost, better mix, operating efficiencies and cost control measures. We expect revenue/EPS CAGR of 8%/24% over FY23-26E. Maintain BUY with Mar’25 TP of INR 420 (1yr fwd PE: 20x). Inability to deliver healthy performance at subsidiaries is a key risk

* 3QFY24 – margin beats estimates: SEL reported consol. net sales stood at INR 7.2bn (+5% YoY, +2% QoQ), 2% above JMFe. EBITDA stood at INR 873mn (+8% YoY, +25% QoQ). EBIDTA margin stood at 12.1% (+40bps YoY, +220bps QoQ), 110bps above JMFe. Sequential improvement was led by operating efficiencies owing to completion of restructuring exercise in Phoenix lamps and LDC-China. Adj. PAT came-in at INR 402mn (+6% YoY, +16% QoQ). Gross debt declined by INR 194mn during 9M to INR 6.2bn. Company maintained its capex guidance of INR 1.4bn over next 12-18 months towards capacity addition and restructuring operations.

* Suprajit Controls Division (SCD): Revenue for 3Q stood at INR 3.1bn (-5% YoY; -3% QoQ). EBITDA margin improved 270bps QoQ to 6.2% (-40bpsYoY). Automotive business performance was affected owing to UAW strikes in North America during Oct’23. Nonautomotive cables business has declined by c.15 YoY owing to inventory correction and muted demand environment. However, SEL remains hopeful of NA non-automotive market bottoming-out during 4Q. China plant relocation / restructuring is complete and the management is working towards new business development. During 3Q, SEL won an order worth USD 5mn / year from a marquee NA customer. The strategy of ‘One Suprajit’ as a global platform has led to multiple new businesses wins (across both Auto and nonAuto cables and Actuators) and is expected to drive healthy growth going forward.

* Domestic cable division (DCD): Revenue for 3Q stood at INR 2.9bn (+8% YoY; +3% QoQ). Margin came at 18.4% (-10bps YoY; +180bps QoQ). The company indicated growth in the DCD vertical is led by PVs. Domestic 2W market has also started recovering (though entry-level segment still remains a laggard). Aftermarket segment continued to remain tepid but the company expects a gradual recovery going ahead. DCD vertical has started winning new ‘non-cable’ businesses (includes CBS, actuators, latch assembly etc) some of which are commercialised and expected to ramp-up in the coming qtrs.

* Phoenix Lamps division (PLD): Revenue stood at INR 1.03bn (+7% YoY, +5% QoQ). Margin came in at 12.4% (+150bps YoY, +10bps QoQ), 40bps above JMFe. Restructuring at PLD has started yielding results and the company expects further improvement in operational efficiencies. The company reiterated its stance to be the last man standing for PLD and expects aftermarket segment to drive growth. Recent launch of LED retrofit has been received well in the aftermarket segment.

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