ICICI Securities Recommends Buy This Small-Cap Auto Components Stock For 33% Gains

ICICI Securities in its report published on Today, 17 June 2022, on the Sansera Engineering Ltd, an Auto components & Equipment company, recommends buying for the target price of Rs 900 per share.

CMP, Target Price, 52 Week Low & High, Performance

The current market price (CMP) of Sansera Engineering is Rs 680 per share. The 52-Week low is Rs 548.55 per share. The % 2-week high level is Rs 898 per share. According to the ICICI Securities given a Target Price of Rs 900, and the CMP, the stock could jump 33% in 12 months.

The P/E ratio is almost parallel to its sector P/E ratio. The P/E ratio is 27.54, while the sector P/E ratio is 27.87.

The share price of the company in the last 3 months moved up 11.76%. It has given negative returns in the last 1 month.

Key triggers for future price performance

• History of consistent outperformance to industry. We expect the trend to continue amid robust order wins from domestic & marquee OEMs in global space with consequent sales growth built in as 17.8% over FY22-24.
• Strong focus on de-risking the existing product profile (engine heavy) with five year sales target at 25% from non-auto and 15% from AUTO-TECH AGNOSTIC & xEVs, primarily riding on indigenously developed capabilities. It has developed drivetrain, suspension, steering and braking components in this direction for the vehicle categories namely 2-W, PV and CV space.
• With raw material a complete pass through, albeit with a time lag, we see margins stabilising at ~18% mark building in operating leverage benefits. Consequent return ratios are expected to improve to ~17% levels by FY24E. Ensuring PAT growth is seen at 33.7% CAGR over FY22-24E.
• Healthy b/s, with total debt at | 645 crore (FY22) with debt: equity at ~0.6x & consistent positive cash flow from operations (>| 200 crore per annum). Forward capex spends of ₹250 crore/year to be met through internal accruals.
• Long-standing customer relationship with OEM's like Maruti Suzuki, Honda Cars, Toyota among others in the PV space and Bajaj Auto, HMSI, Royal Enfield among others in the 2W space. Top 5 customers contribute ~54% to its sales with Bajaj Auto as its anchor client contributing ~17% to its sales.

ICICI Securities suggests buy for a target price of Rs 900/share

Sansera Engineering's price has corrected ~18% since listing from ~ Rs 818 levels in September 2021, underperforming the wider Nifty Auto index. "We initiate coverage on Sansera Engineering with a BUY rating on the stock amid robust order book wins & strong penchant to grow ahead of industry. We value SEL at Rs 900 i.e. 20x P/E on FY24E EPS of Rs 45, building in 18%, 34% sales, earnings CAGR, respectively, over FY22-24E," the brokerage has said.

Company Overview- Sansera Engineering Ltd.

Sansera Engineering Ltd, established in 1981, is a Bengaluru-based engineering-led integrated manufacturer of critical precision-forged components (engine, non-engine oriented) for end application in the predominantly auto domain. The company produces and distributes a comprehensive range of quality forged and machined components and assemblies that are vital in the automotive industry's two-wheeler, passenger vehicle, and commercial vehicle verticals.
Automotive provided 88.45% of revenue in FY'21, while non-automotive contributed 11.45%. India accounts for about 65% of the company's revenue, with the remaining 35% coming from other countries. The company is a significant provider of connecting rods all around the world. The company has 15 manufacturing facilities in India, with nine of them in Bangalore.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.