Diversification led robust growth outlook…
About the stock: Sansera Engineering (SEL), est. in 1981, is a Bengaluru based, engineering led, integrated manufacturer of critical precision forged components (engine, non-engine) for end application, predominantly in auto domain.
• FY24 sales: Auto ICE~76%; non-auto~12%; Tech agnostic & EVs~12%
• FY24 geography mix: India ~69%; Europe ~18%; US ~10%; Others ~3%
Q3FY25 Result: Sansera Engineering reported steady performance in Q3FY25. On the consolidated basis, total operating income for the quarter stood at ₹ 728 crore (up 2% YoY) with EBITDA at ₹127 crore and corresponding EBITDA margins at 17.5% (up 10 bps QoQ). PAT in Q3FY25 came in at ₹56 crore (up ~16% YoY). Sales mix for Q3FY25: 76% – Auto-ICE, 13% – Auto-tech & xEVs & 11% from non-auto.
Investment Rationale
• Robust orderbook to drive healthy double-digit growth: Sansera Engineering is a prominent player in the auto component sector specializing in the production of precision forged parts such as connecting rods, rocker arm, crankshaft, etc. in Auto ICE domain; suspension parts, braking components and aluminium forged components in Auto Tech agnostic domain, drive train components in EV domain and structured parts in non-auto space (Aerospace, Defence, Off-Road segment, etc.). SEL boast robust orderbook of ~₹2,200 crores as of 9MFY25, with 55% orders from emerging and margin accretive segments (Non-auto and Auto Tech Agnostic & xEVs). Notably, ~62% of these orderbook are from international market. Thus, with proven capabilities & capacities in place, SEL is strategically positioned to evolve into a globally recognized precision engineering company. We have baked in 14.3% revenue CAGR over FY24-27E, with sales potentially reaching to ~₹ 4,200 crore by FY27E.
• Diversification in progress, targeting 20% EBITDA margins: As of 9MFY25, SEL derives ~74% of its revenue from Auto-ICE segment while it realises balance ~15% of sales from Auto Tech Agnostic & EV segment and ~11% from non-auto segment. Sensing relatively higher ICE exposure, SEL is proactively implementing a strategy to diversify its revenue stream by reducing auto-ICE share of sales to 60% and augment share of tech agnostic-auto and non-auto share of sales to 20% each in years to come. SEL is also aiming to improve to improve EBITDA margins by 0.5% annually, with a medium-term goal of reaching 20% EBITDA margins.
Rating and Target Price
• With active expansion in non-auto space, robust order book and deleveraged B/S, we have a positive view on Sansera amid structural positives being healthy double-digit margins and return ratios profile. We retain our BUY rating on SEL, valuing it at ₹ 1,620 i.e., 24x PE on FY27E.
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