Suprajit Engineering (CMP: INR 463)

- A truly diversified auto ancillary

Business overview
Suprajit Engineering has established itself as a leader in Mechanical Control Cables. It is
India’s largest cable manufacturer and the world's biggest player in the two-wheeler cable
market. Over time, the company has evolved from a single product, segment, set of
customers and location to a diversified global entity. So, there are two key aspects of their
business strategy – a) diversifying into new segments with inorganic acquisitions; b)
diversifying into new geographies along with manufacturing facilities across India, the UK,
the US, Mexico, and China. The company has the ability to meet the customer demand with
onshore abilities, near-shore abilities and low-cost destination like India that makes it a
preferred vendor for customers. The company is also benefitting from China + 1 theme.

Segmental contribution Geography wise revenue contribution

(%)
100% 1% 5%
90% 8% 23% 22% 100% 1%
10%
80% 90%
70% 19% 80% 39%
26% 70% 53%
60%
62%
50% 97% 60%
25%
40% 50% 99%
33% 90%
30% 40%
20% 30% 61%
34% 47%
10% 25% 18% 20%
0% 3% 10%
FY02 FY12 FY22 FY23 0%
FY02 FY12 FY22 FY23
Automotive 2-wheeler
Aftermarket Non-automotive Domestic Global + India exports

Source: Company annual report

Key growth drivers

1. Improving global macros: With inflation Macro environment in developed nations

on downward trajectory, Central banks 7.0
across the world are expected to cut 6.0
interest rates this year between 50 bps to 5.0 4.3
100 bps to support the economies. Rate 4.0
3.0 2.6
cut cycle has started with ECB and Bank of
2.0 1.9
Canda being the first ones to revise the 1.7
1.0
rates downwards. Inflation in developed 0.0
Mar'23

Jun'23

Sept'23

Dec'23

Mar'24

Jun'24

Sep'24

Dec'24

Mar'25

Jun'25

Sep'25

nations is expected to remain under check

going ahead along with improvement in
GDP. This is positive for Suprajit Inflation (%) GDP, YoY%
Engineering as it is present in multiple
Source: Bloomberg
 locations like USA, UK, Hungary, Luxemburg, Germany, Mexico etc. As a result, we
can expect improvement in topline going ahead.

2. Focus on legacy cable business – Management has expressed complete focus on

winning business in the legacy auto cables segment, for which they are focusing on
unpenetrated areas like door cables, sunroof cables, and actuators. Currently, the
company is a very small player in the doors cable segment but foresees decent order
wins going ahead, this will lead to a decent volume growth as the number of cables
required in a door is more compared to other areas in a vehicle. The company
anticipates a notable increase in realization, propelled by the rising volumes going
ahead.

3. Suprajit electronics division – Key growth opportunity: SED has seen solid growth
and margin improvement in recent quarter. They had a good double-digit EBITDA
margin for the last two quarters. Going ahead the company is confident of double-
digit margins. Management views SED as a key growth opportunity and anticipates
substantial business wins in this sector in the future. This optimism is fuelled by three
main factors - a) expected surge in electronic content per vehicle from the current
20% to an estimated 60%- 70%; b) the company's ability to harness its robust
technical expertise; c) its established and enduring client relationships both
domestically and internationally. In a short span, it has received orders worth INR 1.5
bn from traditional and new-age OEMs. SED has started supplying its instrument
clusters to a leading E2W OEM and expects a significant ramp-up going ahead. The
company see a huge potential for SEL in the electronics business and believe it can
cross-sell these products to its existing customers owing to its strong customer
relations.
Financials
Profit and Loss statement Cash Flow Statement
Year ended Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar- Mar- Mar- Mar- Mar-
Net Revenue 15,628 16,409 18,405 27,524 28,959 Year ended 20 21 22 23 24
Op. Expenses 13,441 14,041 16,750 24,920 25,729 164
1329 1800 1070 2192
PBT 9
EBITDA 2,187 2,367 1,655 2,604 3,230
Depreciation 581 568 585 955 1037
Depreciation 581 568 585 955 1,037
Interest expense 228 -192 -145 -356 -514
EBIT 1,606 1,800 1,070 1,649 2,192 -
Other income 224 336 366 506 599 Change in working 496 -496 -471 131 -691
Interest Exp. 228 192 145 356 514 capital 1
EO Items - Tax paid -470 -516 -621 -681 -605
-274 116
gain/(loss) - - - Less: Interest/Div.
-41 336 366 506 599
Reported PBT 1,329 1,943 1,407 1,800 2,278 Income Recd.
Tax 289 516 621 681 605 Other operating
Margins 198 117
Cash Flow (%)
Reported PAT 1,040 1,427 786 1,119 1,673 Mar- Mar- Mar- Mar- Mar-
Cash
Yearflow from
ended 2020 116
Minority Int. - - - - - 2320 2021
1498 2022
1845 2023 2024
2019
operating
EBITDAactivities
Margin 5
Net Profit 1,040 1,427 786 1,119 1,673 (%) 14.0 14.4 9.0 9.5 - 11.2
Adjusted PAT 765 1,427 903 1,119 1,673 EBIT Margin (%) 10.3 -
-664 11.0
-312 5.8
-532 6.0
332 7.6
PAT Margin (%) 4.8 8.5 4.8 4.0 1050
5.7
Adjusted EPS Capital expenditure 9
5.5 10.3 6.5 8.1 12.1
(INR) Inc/(Dec) in
-943 542 317 6
investments -
+ Interest/Div.
Balance sheet 41
Income Recd.
-
Year ended Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 - -
Cash flow from 230 -215 332
Share Capital 140 140 138 138 138 1565 1050
investing activities 3
Reserves & Surplus 8,398 9,757 10,701 12,106 13,433
Inc/(Dec) in share
Networth 8,538 9,897 10,840 12,245 13,572 - 212 502 605 0
capital
Debt 3,113 3,278 3,115 6,517 6,017 340
Capital Employed 11,651 13,175 13,955 18,762 19,489 114 165 -163 -500
Inc/(Dec) in debt 2
Gross Fixed Assets 7,802 8,195 8,675 11,828 12,878 Dividend Paid -436 -280 -346 -318 -346
Accumulated Others -263
1,667 2,214 2,799 3,753 4,791
Depreciation Cash flow from 368
Capital work in -585 97 -7 -846
152 49 102 278 278 financing activities 9
progress 102
Net Fixed Assets 6,286 6,031 5,978 8,353 8,365 169 1826 679 123
Net cash flow 8
Investments 890 348 31 25 25 446
Non Current 442 2509 3788 5496
890 348 31 25 25 Opening balance 7
Investments 549
Current Assets, 612 4335 4467 5619
6,962 8,540 11,377 12,216 17,310 Closing balance
Valuation (x) 5
Loans & Advances Mar- Mar- Mar- Mar- Mar-
Inventory 2,762 3,145 3,433 4,827 5,407 Year ended 2020 2021 2022 2023 2024
Debtors 2,750 3,320 2,972 4,608 5,163 P/E (x) 71.0 38.1 60.2 48.6 32.5
Cash & Bank balance 2,509 3,788 4,467 5,496 5,619 P/BV (x) 6.5 5.6 5.0 4.5 4.0
Loans & advances -1,059 -1,713 505 -2,715 1,122
Current Liabilities &
4,154 3,957 3,431 5,583 6,211
Provisions
Liabilities 4,154 3,957 3,431 5,583 6,211 Mar- Mar- Mar- Mar- Mar-
Net Current Assets 2,808 4,583 7,946 6,633 11,099 BalanceSheet 2020 2021 2022 2023 2024
Application of Funds 9,984 10,961 13,955 15,011 19,489 RoE (%) 9.4 15.5 8.7 9.7 13.0
RoCE (%) 16.3 17.2 10.6 13.2 14.6
Asset/T.O (x) 1.7 1.7 1.4 1.7 1.5
Net Debt/Equity (x) 0.1 (0.1) (0.1) 0.1 0.0
EBIT/Interest (x) 8.1 11.1 9.9 6.1 5.4
BalanceSheet
RoE (%) 9.4 15.5 8.7 9.7 13.0
RoCE (%) 16.3 17.2 10.6 13.2 14.6
 Peer comparison
5 Year
Mar
Name CMP Rs. P/E ROE % sales OPM %
Cap Rs.Cr.
growth
Samvardh. Mothe. 152 36 1,03,307 11.8 9.2 9.4
Uno Minda 974 65 55,935 18.9 18.9 11.3
ZF Commercial 16,986 80 32,206 15.6 5.8 14.9
Suprajit Engg. 461 38 6,411 12.9 12.7 11.2
Bosch 30,652 49 90,403 15.9 6.7 12.5
Endurance Tech. 2,419 50 33,993 14.5 6.4 13.0

Source: Screener

On comparison with peers it may seem that the company is having lower ROE and margin.
However, going ahead, the company expects the margins to improve for all the divisions
which gives us confidence that the company is a candidate for rerating.
Shareholding pattern – FII & DII have started accumulating
Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24
Promoters 44.6% 44.6% 44.6% 44.6% 44.6% 44.6% 44.6%
FIIs 5.4% 5.1% 5.1% 5.1% 4.8% 4.6% 4.8%
DII 15.2% 15.6% 16.0% 15.9% 15.9% 16.2% 17.5%
Public 34.7% 34.7% 34.3% 34.3% 34.8% 34.6% 33.1%
Source: Screener

Key catalyst for growth – New product launches

The company has recently created a mechanical disc brake specifically made for the <125cc
2W segment. It has positioned the product as a cost-effective alternative; the mechanical
disc brake is estimated to be around 30% cheaper than hydraulic disc brakes, albeit 20%
more expensive than traditional drum brakes. This development marks a strategic move by
the company to catch up with the premiumization trend in the sub 125cc segment. The
company plans to move into hydraulic disc brakes and ABS systems, gradually positioning
itself to compete with industry leaders such as Brembo, Bosch, and Endurance.

Technical view
The stock is taking support at long term trend line and it is above all moving averages. The
stock has been in consolidation for almost two years and it is trying to break out with
volume. There is cup and handle formation. Also, all the fundamental analysts have a buy
rating on the stock with upside of 10-15% from current price levels.
Source: Tradingview