Suprajit Engineering Q2 Results Review - Light Duty Cable Drags Margins; Outlook Positive: Nirmal Bang

Nirmal Bang Report

Suprajit Engineering Ltd.’s Q2 FY23 consolidated revenue at Rs 5.5 billion (excluding light duty cable) grew by 21% YoY and 13% QoQ, supported by a strong order book, new wins from original equipment manufacturers and price hikes.

Consolidated revenue (including LDC) stood at ~Rs 7.2 billion, 5% above our estimate.

Consolidated Ebitda margin (excluding LDC) stood at 13%, down 50 bps YoY. LDC posted a Rs17 million loss at the Ebitda level, dragging the consolidated margin.

Overall Ebitda margin stood at 11%. LDC margin was hit by currency headwinds in China and Hungary, higher transitory expenses and challenges in taking price hikes.

The management has cut revenue guidance by 5-7% to ~$90 million for LDC and expects margin to remain subdued for the next few quarters.

But, it is confident of achieving double-digit margin by Q4 FY24. We believe that Suprajit Engineering will be one of the key beneficiaries of a recovery in the domestic automotive industry where it has a dominant market share in two-wheelers (~75%) and four wheelers (~32%).

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