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Dolat Capital
Suprajit Engineering
(Accumulate)
CMP: ₹110.15
Target: ₹121
Suprajit Engineering (SEL) reported numbers below our expectations on the back of higher employee costs for the June quarter as the company had a wage revision to the tune of around 16 per cent. We expect the company to continue to ride high on margins on the back of increasing contributions from exports as well as the automotive business (four-wheelers). We believe the turnaround in the automobile industry expected from the second half of the current fiscal will help drive growth for SEL as 90 per cent of its revenues come from OEMs. With the company consistently getting incremental orders from global majors, we believe the export revenues would keep growing at a comparatively faster pace than the domestic revenues. The company reported PAT of ₹10.6 crore, down by 17 per cent q-o-q and up 19 per cent y-o-y. PAT margins stood at 7.6 per cent for the quarter. The company’s return on equity and return on capital employed of about 28 per cent (FY15E) are among the best in the auto ancillary industry.
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