Buy Suprajit Engineering Ltd For Target Rs.625 by Choice Institutional Equities Ltd
Global turnaround drives strong earnings recovery:
SEL delivered a strong Q1FY27 performance, with consolidated revenue growing 24% YoY to INR 10.7 Bn, its highest-ever quarterly revenue, while EBITDA surged 57.5% YoY to INR 1.3 Bn, expanding margin by 256 bps to 12.0%. The key highlight was the sustained turnaround in Global Cables & Mechatronics (GCM), where revenue grew 27.6% YoY and EBITDA margin expanded sharply to 12.6% from 5.8%, driven by benefits from completed global restructuring, project ramp-ups and improved operating efficiency. The management expects GCM margin to remain within 10–12% in FY27E, supporting further earnings recovery.
Electronics momentum and new business wins strengthen growth visibility:
Sensors, Electronics & Displays (SED) remained the fastest-growing division, with revenue increasing 48% YoY and EBITDA doubling YoY, while margin improved to 9.3%, led by strong traction in digital clusters and throttle position sensors. Strong order inflows have triggered capacity expansion, while three multi-year international GCM contracts with annualised value of USD 8.2 Mn and 25 cable projects from China’s largest global EV OEM provide strong medium-term visibility. Meanwhile, ICM revenue grew 20.8% YoY, though margin moderated to 12.8% due to delayed wage-cost pass-through, with recovery expected in Q2– Q3FY27. We believe the completion of restructuring, strong order momentum and increasing contribution from higher-value “Beyond Cable” products would sustain margin recovery and double-digit growth ahead.
View and Valuation:
We revise our FY27E EPS estimate down by ~3%, mainly due to the cascading impact of Q1FY27 results, while raising FY28E EPS by 5.1%, factoring in the well-progressing SCS turnaround, improving global margin trajectory and strong electronics growth momentum. We value the company at a 25x PE (previously:22x) multiple on FY28E EPS, considering improving operating leverage, rising contribution from high-margin “Beyond Cable” products and sustained double-digit growth visibility. We arrive at a TP of INR 625 and accordingly, upgrade our rating from ‘ADD’ to ‘BUY’
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