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Axis Securities
PPAP Auto (Buy)
CMP: ₹552.85
Target: ₹627
Key takeaways: a) A sealed bond with Japanese and Indian OEMs together forming about 85 per cent of revenues of the company. Relationship spans over three decades with India’s largest PV manufacturer Maruti Suzuki forming about 45-48 per cent revenues. Client additions across automobile manufacturers such as PVs, CVs, 2Ws a step to de-risk client concentration.
b) Unaffected by EV (electric vehicle) disruption due to critical and indispensable nature of Sealing and Injection Molded Parts EV era augurs well for PPAP Automotive given its technological skills and capabilities in polymer extrusion and engineered plastics. The management has indicated that it has the capability to supply Sealing Systems and Injection molded parts to EVs for the international markets.
c) Conscious strategies to rationalise costs and improve local RM sourcing content, judiciously opening capacities closer to auto clusters across North, South and West India.
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