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Valuations attractive; global business available virtually for free

We upgrade Suprajit Engineering (SEL) to BUY with a revised SoTP-based TP of Rs550 (22% increase). We highlight that against its current valuations (~Rs61bn market capitalization), ~21x PER for standalone/India business (vs ~28x domestic peer average) itself provides healthy upside/downside protection, even as global business (52% of revenue) is available virtually for free despite strategic groundwork over the past 5Y. SEL, through multiple acquisitions, has consolidated its positioning in control cables (No 2 globally after Hilex, a Japanese major working mainly with Japanese OEMs), with presence across geographies and sharp improvement in profitability (doubledigit margins in H2FY25) led by strategic initiatives (ex-SCS acquisition, where EBITDA break-even is expected by Q4 with 6-10% mid-term margins, akin to other global businesses). The domestic business (48% of revenue; centred around cables) is slowly moving ‘beyond cables’, led by breakthrough in brakes and electronics (instrument clusters, actuators) via R&D (now also being supplemented by tech tie-ups, eg with Blubrake, Italy, for ABS, in Apr-25). We project 9/21/48% revenue/EBITDA/EPS over FY25-28E, with 19% RoE vs midteens earlier and near-zero net D/E, though near-term macro weakness drives ~6% cut in FY26E/27E EPS. Optionalities (brakes, growth acceleration in PLD) are yet to be built in and provide further upside.

Global scale in place; structural efforts driving profitability improvement

Aided by major acquisitions (Wescon, Kongsberg LDC, SCS in cables; Phoenix Lamps), SEL is now No 2/3 in control cables/lamps (~15% cable revenue CAGR over FY17-25 vs -2% for the leader Hilex) with scope for share gains on continuing industry consolidation, its cost leadership, and widespread footprint. Its recent customer-backed SCS acquisition further bolsters on-shore/offshore/near-shore capabilities; SEL’s strong track record is leading to a pick-up in enquiries at SCS (despite prior insolvency); SCS Morocco has seen improved growth in recent months. Order wins, aided by homegrown product developments in electronics (eg: seat activation chipsets for JLR, ‘egrips’, and ‘e-throttles’ for a large Chinese EV OEM), would drive growth in global business (SCD) despite the challenging environment. The structural measures over the past 5Y, including at SCS (eg operational restructuring, partial manufacturing shifting to low-cost locations), are starting to deliver, with double-digit margins in H2FY25 despite tough macros. SCS is likely to achieve EBITDA breakeven by Q4, with mid-term margins at 6-10%. We build in 9% revenue CAGR over FY25- 28E at SCD (including SCS) with FY28E margin at 10.9% (vs 5.6% in FY25).

Domestic business transitioning ‘beyond cables’, optionalities not yet priced in SEL dominates control cables in India (eg over 80% share in 2W OEMs), with past 5Y revenue/PAT CAGR of 10/11%. SEL’s forward-looking R&D/tech investments and strong execution are being increasingly recognized by OEMs, resulting in order wins across electronics-based areas like brakes, clusters, and actuators (including from incumbents vs largely new-age EV players earlier). SEL’s product development (including for exports, aftermarket) is being supplemented by appropriate tech tie-ups. Substantial growth is expected in brakes over 2-3Y; SEL aims to be a one-stop shop due to the large TAM (potentially higher than in cables) and OEMs’ diversification interest; it is also exploring ways to accelerate growth at PLD to double digits vs low-single digit now, and is confident of sustained double-digit domestic growth ahead even if the industry grows in single digit.

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