Fundamental analysis of Suprajit Engineering Limited

Podcast Duration: 6:53
Fundamental analysis of Suprajit Engineering Limited Voice over: Hello Doston, welcome to another exciting podcast by Angel Broking. Dosto hum ek nayi series ki shuruaat kar rahe hai, jahan hum alag alag companies and unke stocks ka fundamental analysis aapko dengein. Aaj ke podcast mein hum nazar daalenge on a very resourceful company that has made a niche for itself in the segment that it is operating in. We are talking about Suprajit Engineering Limited. This company is in the business of manufacturing automotive cables and halogen bulbs. What sort of automotive cables you asked? Well, itna samajh lijiye ke inke bina motorcycles mein jaan nahi rahengi. Brake cables, clutch cables, throttle cables, transmission cables, starting cables, gear shift cables- yeh saarein cables manufacture karti hai yeh company along with halogen and auxiliary lamps. This Bangalore-based company also manufactures mechanical gauges such as speedometers, tachometers, fuel gauges and a variety of other instruments. Their four-wheeler automotive clients include Volkswagen, BMW, Mahindra, Tata Motors, Piaggio, Maruti Suzuki. Their two-wheeler clients include TVS Motors, Hero Motors, Bajaj Motors, Honda, Royal Enfield and Mahindra 2-wheelers section. As of July 13th, Suprajit Engineering is trading at Rs 293. Q2FY21 mein SEL ne bahut hi badiya all-round performance deliver kiya hai. Revenue year-on-year basis pe 11% se badhkar Rs 440 crore pe ja baitha hai and ismein sabse bada contribution hai Phoenix lighting segment ka which grew by a strong 14%. Second strongest contribution raha automotive cable division ka which grew by a respectable 12% on a year-on-year basis. EBITDA yaane Earnings before interest, taxes, depreciation and amortization grew by 31% year-on-year basis to Rs 73.5 crore. The company has implemented a lot of cost-control initiatives and export revenue mein bhi badath dekhi gayi hai. Chaliye ab thodi gehrai se company figures ko dekhte hai. Phoenix lighting revenue has grown by 14% y-o-y basis pe to Rs 92.2 crore. Saath-saath, yeh company non-automotive cable section mein bhi operational hai jo 7% se badha hai to Rs 78.6 crore. Management ka kehna hai ke their outlook for the coming quarters looks strong and promising as they are expecting robust business from Indian original equipment manufacturers. Company management ka yeh bhi kehna hai ke growth prospects for the automotive as well as the non-automotive segment are quite strong. Company ne apne concall mein kaha ke unki margins expand hui hai because of a better mix of high revenue from after-market and export segments. Additionally, there has also been improvement in operational efficiency across the board in a number of group companies. Aftermarket ka matlab hai woh market jab equipment kharida jata once the sale of a car or two-wheeler is done. SEL’s management said that aftermarket revenue has grown as higher import costs is imposed on goods coming from China, streamlining of logistics within domestic Indian markets and the changing preferences of a lot of companies to give work orders to organised players rather than unorganised players. According to the company, the margin or the difference between revenue and expenses is expected to be in the bracket of 13-15%, which will be largely determined by the volume of business coming in. However, company ne investors ko yeh bhi caution kiya hai margins kam ho sakte hai in the coming quarters as commodity prices badhti ja rahi hai and salary cut ka rollback hoga from September. The company has also said that there will be no pass-through on the raw material cost for international customers but for Indian OEMs, raw material costs will be passed on based on negotiations with these companies. Four wheeler se aane wala revenue has also registered an increase on the ground of higher exports in this quarter. Aaiye ab nazar ghoomate hai company ke shareholding pe. Promoter ki shareholding unchanged rahi March 2021 quarter mein at 44.57%. In the same quarters, FPIs and FIIs have taken a larger exposure in the company and have bumped up their holdings in the company to 4.33% from 3.45%. However, at the same time, the total number of FPI/FII investors has gone down drastically from 170 to 65 in the same quarter. Mutual fund holding mein zyaada difference nahi aaya. Number of mutual fund investors iss company mein 16 se 18 tak hue while their overall holding moved up from 10.76% to 10.84% in the March 2021 quarter. Company ka business obviously Covid se hurt hua hai. In July last year, lockdown ke impact ki vajah se company ka share was trading at Rs 151. Quarter ending March 2020 quarter mein the company registered revenues of Rs 393.2 crore. But uske agle quarter, yaane the quarter ending in June, mein actual strong impact dekhne mila when the total revenue slid to Rs 183.2 crore. However, since then the company has recovered and hasn’t looked back. In the successive quarters, the company went from earning Rs 451.7 crore in the September quarter to Rs 525 crore in the March 2021 quarter. The same is the case with net profit- September 2020 mein company ka net profit tha sirf Rs 67.7 crore and in the March 2021 quarter company ne record kiya Rs 142.7 crore in net profit. Doston, Suprajit Engineering Limited is definitely on a growth path which is reflected by the rising demand for the stock. However, there are risks in terms of a sudden return of the third covid wave. Permitting easy import of Chinese products can also hurt the company’s prospects. Jaane se pehle, ek baat yaad rakhiyega ke stock market investing mein risk hamesha rahega. This podcast has been made for educational purposes only and the investor must do his own research as well. Aise aur interesting podcasts sunne ke liye humein follow karein via youtube and other social media channels. Until then goodbye and happy investing! Investments in the securities markets are subject to market risks. Read all the related documents carefully before investing.