Sansera Engineering hovering near its all-time high; is now a good time to invest?

Updated: 21 Sep 2023, 09:04 AM IST

Sansera Engineering expects 20% revenue growth in FY24 from its domestic ICE 2W component space, driven by newly launched models. The company also anticipates a recovery in the 2W EV market and aims to achieve 40% revenue growth in exports.

During Q1 FY24, the company secured total orders amounting to Rs. 3.7 billion. Almost 70% of new order inflows came in from the Auto-ICE segment.

Shares of Sansera Engineering, an auto ancillary firm, are hovering near their all-time high of 998 apiece. With the current market price of 944, the shares are just 5.41% below their record levels.

After hitting an all-time low of 548.55 in May 2022, the stock quickly recovered and gained nearly 72% to date. Going forward, the stock's positive trend is expected to continue, as per the projections made by domestic brokerage firm ICICI Securities, which retained its 'buy' rating on the stock with a target price of 1,133 apiece. This price target implies an upside potential of 20% for the stock. 

Stock price chart of Sansera Engineering.

Sansera Engineering is a manufacturer and supplier of a diverse range of components and assemblies that are essential to a variety of systems, including engine, transmission, suspension, braking, chassis, and others.

These components are critical to the seamless functioning of two-wheelers, passenger vehicles, commercial vehicles, and aerospace, off-road, agriculture, and other industries.

Domestic 2W space to grow 20% for SEL in FY24

The company is expecting a 20% revenue growth in FY24 from its domestic ICE 2W component space compared to the 2W industry growth of 10%.

The brokerage points to several key drivers of this anticipated growth, including the execution of newly launched models with a kit value of 8,000–10,000 per unit. Notable models in this category include the Triumph Speed 400, Harley X440, and TVS Apache RTR310. It stated that these models are expected to play a pivotal role in driving growth, alongside improvements in the product mix within the sub-300cc models.

"On the 2W EV front, recovery is happening in scale after a sudden decline in June-July 2023, and SEL is expecting the monthly EV market to return to its highs of April-May during the festive season itself. For SEL, the value addition per e-2W is more than 1.5x that of the average ICE model kit value," said ICICI Securities.

Exports and aerospace growth on track as guided

The brokerage highlights that the company is on track to achieve its FY24 target of approximately 40% revenue growth in exports, equivalent to over 6.5 billion, which would include an impressive expansion of the aerospace segment's revenue, moving from around 900 million in FY23 to roughly 1.4 billion in FY24. This uptick is attributed to the recovery in semiconductor supplies in target markets and the execution of fresh orders, it said.

The 4,000T new press ( 300 million capex), flexible between aluminium and steel forging, would be operational in mid-FY25 and help SEL take orders for larger products. SEL is planning to invest in a US warehousing and machining facility with a capex of 1 billion H2FY24 onwards, with visibility of ramping up of order book from the likes of Cummins and an EV car maker, the brokerage added.

Investing in new-generation products

The company is investing a part of its margin in new-generation products in the non-auto domain too, on an experimental basis, other than having invested in the radar technology business to tap ADAS system-led revenue going forward.

Thus, the brokerage believes that the company is ploughing back a part of its potential margin for diversification of its portfolio beyond ICE products.

Q1FY24 performance

The company clocked a 24% YoY growth in revenues to 660 crore, and it reported a consolidated net profit of 45 crore, which is an increase of 30% YoY. During Q1 FY24, the company secured total orders amounting to Rs. 3.7 billion. Almost 70% of new order inflows came in from the Auto-ICE segment, 21% from Auto-Tech Agnostic & xEV segment, and the remaining 9% from the non-auto segment. As of June 2023, the order book with annual peak revenues stood at 16.9 billion.

04 analysts polled by MintGenie on average have a 'strong buy' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before making any investment decisions.


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First Published: 21 Sep 2023, 09:04 AM IST