Auto Ancillary stock which is an integrated manufacturer of complex and critical precision-engineered components gets a ‘Buy’ tag on it from Axis Direct, one of the well-known Financial Firms, with an upside potential of 22 percent from its current market price of Rs. 990.
Sansera Engineering
Sansera Engineering Limited is an integrated manufacturer of complex and critical precision-engineered components across automotive and nonautomotive sectors.
With a market capitalization of Rs. 5,323 Crores, On December 27, 2023, the shares of Sansera Engineering Limited were trading at Rs. 990, down 0.26 percent from its previous day’s close price of Rs. 996.
The company’s revenue from operations grew 17.56 percent from Rs. 1,989.03 Crores in FY22 to Rs. 2,338.3 Crores in FY23, accompanied by increasing profits of Rs. 130.45 Crores to Rs. 146.2 Crores.
Axis Direct, one of the well-known and leading Financial Firms, has given a ‘Buy’ tag to the company’s stock with a target price of Rs. 1210 indicating a potential upside of 23 percent as compared to the current market price of Rs. 990
The rationale behind providing such a recommendation pertains to various trigger points Comprising,
Strong Order book with good revenue visibility
It has experienced a significant upswing in its order book and as of September 2023 the company’s new orders with a peak annual revenue rate of Rs. 1,930 Crores show a noteworthy shift with ~52 percent of the share emanating from non-ICE Segments. This comprises 12 percent from Tech Agnostic Auto, 19 percent from Electric Vehicles (EV), and 21 percent from non-auto sectors.
The rest 48 percent of the new orders are attributed to ICE components. The relatively vulnerable 2W-ICE segment which is facing the highest risk from EV disruption constitutes only 15 percent of the total order book.
Growth in Non-Auto products to de-risk the company’s portfolio The company’s order book indicates its strategic move to reduce its reliance on ICE
Components in the upcoming time. Its order book comprises new aerospace and defence segments with a peak annual revenue of Rs. 121 Crores that are expected to contribute over 10 percent to the company’s consolidated revenue.
It has established a new greenfield facility in Bengaluru and has allocated two-thirds for the aerospace segment and the remaining for the defence segment due to a strong order influx from customers like Collins Aerospace, Boeing, Airbus, HAL, and many more. The new facility is projected to generate ~Rs. 350 Crores in revenues.
Axis Direct expects Sansera Engineering to post 21 percent CAGR growth in EBITDA and 30 percent CAGR growth in PAT over FY23-26E on account of sales mic tilting towards non-auto ICE components, fungible production lines, and improved operational efficiency.
Based on the above data the company’s EBITDA margins will accelerate towards a targeted 18-19 percent by FY26 from 16 percent in FY23 and its ROE will improve to ~18.5 percent by FY26E from 13.3 percent in FY23.
Sansera Engineering will continue to source its capex funding of ~Rs. 200-250 Crores annually from its robust internal operating cash flows over FY24-26E.
With the above things in focus and other things like its increasing exports, management focus on improving margin trends, its capability to generate strong operating cash flows and expansion plans, its valuation, and other factors contributing to its growth were kept in mind while initiating the buy recommendation.
Written by: Bharath K.S
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
