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Healthy Qtr; New order wins / restructuring to drive performance

Suprajit Engineering (SEL) reported consolidated EBITDAM margin of 12.1% (flat QoQ), broadly in-line with JMFe. Reported revenue was 6% above JMFe led by new order execution in SCD and SED division. 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’. Non-automotive segment has stabilised and is expected to witness gradual recovery in cables demand further supported by expansion in ‘beyond cables products’. Nearterm margin performance is expected to be supported by better mix, operating efficiencies and cost control measures. We expect revenue / EPS CAGR of 12% / 37% over FY24-26E. Maintain BUY with Mar’25 TP of INR 460 (1yr fwd PE: 20x). Inability to deliver healthy performance at subsidiaries is a key risk.

* 4QFY24 – Revenue ahead; margins in line: SEL’s consol. net sales stood at INR 7.8bn (+12% YoY, +8% QoQ), 6% above JMFe. EBITDA stood at INR 944mn (+8% YoY & QoQ). EBIDTA margin stood at 12.1% (-40bps YoY, flat QoQ), broadly in-line with JMFe. Margin improvement in Phoenix Lamps and LDC-China (led by operating efficiencies owing to completion of restructuring exercise) was offset by unfavourable mix in DCD. Adj. PAT came-in at INR 591mn (+44% YoY, +47% QoQ), led by higher other income (owing to forex gains) and lower tax expenses. Gross debt was flattish QoQ at INR 6.2bn. Company has guided for a capex of INR 1.8bn in FY25 towards new product development, capacity addition and maintenance.

* Suprajit Controls Division (SCD): Revenue for 4Q stood at INR 3.7bn (+4% YoY; +19% QoQ). EBITDA margin improved 110bps QoQ to 7.3% (-290bpsYoY). Poor pricing in certain historical contracts, wage increase in Mexico, China import duties and cross currencies impact was a drag on margins. Non-automotive cables business has now stabilised at lower levels. New business wins and expansion of beyond-cable products (eg: Rotary sensors) is expected to drive growth in non-automotive business going ahead. China plant relocation / restructuring is complete and the management is working towards new business development. During 4Q, SEL won an order worth USD 8mn / year from a US customer based on “No China Content” requirement. The strategy of ‘One Suprajit’ as a global platform has led to multiple new business wins (across both Auto & non-Auto cables and Actuators) and is expected to drive healthy growth going forward.

* Domestic cable division (DCD): Revenue for 4Q stood at INR 2.8bn (+15% YoY; -3% QoQ). Margin came at 17.3% (-100bps YoY; -110bps QoQ). Margin decline was due to unfavourable mix. The company indicated growth in the DCD vertical is led by PVs as well as 2Ws. Aftermarket segment continued to remain tepid owing to higher competitive intensity from unorganised players (in grey market). 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 1bn (+9% YoY, -2% QoQ). Margin came in at 15.1% (+650bps YoY, +270bps QoQ), 310bps above JMFe. YoY growth was led by with strong inroads into the aftermarkets, direct exports and through Luxlite Restructuring at PLD has started yielding results as restructuring at Trifa and Luxlite is largely complete. The company reiterated its stance to be the last man standing for PLD and expects aftermarket segment to drive growth.

* Suprajit Electronics Division and Technology Centre (SED & STC): The segment has started ramping-up with revenue at INR 268mn (vs. INR 191mn in 3Q). EBITDA margins also improved sequentially to c.12.8% (vs. 11% in 3Q). Deliveries of actuators, digital clusters and throttle position controls to marquee EV/ICE 2W and 3W supported growth. SED continues to win new orders for multiple products like Digital Clusters, Electro Mechanical Actuators, Rotary Sensors, Throttle Position Sensors, etc. from traditional and new-age OEMs. SEL continues to receive positive customer interest and these products are at different levels of approval with prospective customers.

* Other Highlights: 1) Revenue contribution from Automotive / 2W / Aftermarket / NonAutomotive stood at 36% / 27% / 18% /19% for FY24. 2) SEL is in process to relocate some of its products manufactured in SCD segment in Mexico to India owing to high wage pressure in Mexico.

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SEBI Registration Number is INM000010361