Buy Midcap Auto Ancillary Stock, Board Recommends 125% Dividend, In 3 Yrs Jumps 217%: Sharekhan

Broking firm Sharekhan initiates a Buy call on Suprajit Engineering Ltd. with a target price of Rs. 439/share. The broking firm sees a potential upside of up to 14% if you buy the stock at the current market price.

It is an Auto Ancillary sector firm. With a market valuation of Rs. 5,348.18 crore, it is a Midcap firm.

125% Final Dividend

On Monday, May 29, 2023, the Board of Directors of Suprajit Engineering Ltd. in a meeting recommended a Final Dividend of Re. 1.25/share of Re. 1 each i.e. 125% for the financial year 2022-23.

"Recommended a Final Dividend of Re. 1.25/- (125%) per equity Share of Re. 1/- each for the Financial Year 2022-23," The Board of Directors of Suprajit Engineering Ltd. said in an exchange filing.

Valuation - Maintain Buy with a revised PT of Rs.439/share

According to Sharekhan, Post reporting inline EBITDA the management has shared optimistic out look for its automotive business but indicated that its non-auto business may see a slow growth in the US market due to macro headwinds.

Despite sluggish performance in 2W segment the auto cable division has been maintaining healthy traction and management shares healthy revenue visibility for cable division led by order pipelines. With diversification of its revenue stream SEL's dependence on two-wheeler segment has been coming down.

The two-wheeler segment has contributed 25% to its revenue compared to 34% in FY22 and 61% in FY12. Further the management is endeavouring to build up its electronic division to improve its non-cable revenue mix in next 4-5 years.

"We maintain our BUY rating on the stock with revised TP of Rs 439 on healthy traction in its automotive business, expectation of 270 bps expansion in EBITDA margin over next 2 years and consistent improvement in LDC business," the brokerage has said.

Stock Outlook

On Friday, the stock of Suprajit Engineering closed 0.21% down at Rs. 386.45/share. It traded its 52 week high on 24 May 2023 at Rs. 414.90/share and 52 week low on 13 June 2023 at Rs. 299/share, respectively. It declined 2.44% in 1 week. It gave 13.86% positive return in 1 year. In 3 years, it gave 217.02% positive return. In 5 years, it gave 39.24% positive return.

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