Sansera Engineering, an automotive ancillary firm, currently sees its shares trading near their all-time high of ₹998 per share. With the current market price at ₹944, the shares are only 5.41% below their record levels.
The stock experienced a significant turnaround since hitting an all-time low of ₹548.55 in May 2022, surging by almost 72% to date. Projections from domestic brokerage firm ICICI Securities indicate that this positive trend is expected to continue. ICICI Securities maintains its ‘buy’ rating on the stock with a target price of ₹1,133 per share, implying a potential upside of 20% for the stock.
What exactly does Sansera Engineering do?
The company is a manufacturer and supplier of a wide range of components and assemblies essential for various systems, including engines, transmissions, suspensions, brakes, chassis, and more. These components play a crucial role in ensuring the smooth operation of two-wheelers, passenger vehicles, and commercial vehicles, as well as in aerospace, off-road, agriculture, and other industries.
Growth in 2-wheelers
In the coming fiscal year, FY24, the company anticipates a remarkable 20% growth in revenue from its domestic internal combustion engine (ICE) two-wheeler component sector, compared to the 10% growth expected in the broader two-wheeler industry. This growth is attributed to factors such as the launch of new models with a kit value ranging from ₹8,000 to ₹10,000 per unit. Noteworthy models in this category include the Triumph Speed 400, Harley X440, and TVS Apache RTR310. Additionally, improvements in the product mix within the sub-300cc models are expected to contribute to this growth.
In the realm of two-wheeler electric vehicles (EVs), there is a notable recovery following a dip in June-July 2023. The company anticipates the monthly EV market to return to its April-May highs during the festive season.
Expansion in the aerospace segment
For Sansera Engineering, there’s a significant expansion in the aerospace segment’s revenue, projected to increase from ~₹900 million in FY23 to ~₹1.4 billion in FY24. This growth is attributed to the recovery in semiconductor supplies in target markets and the execution of new orders.
New capex investments
- To bolster its capabilities, Sansera Engineering plans to introduce a new 4,000-ton press (₹300 million capex) that is flexible for both aluminium and steel forging. This press is expected to become operational in mid-FY25, enabling the company to secure orders for larger products. Additionally, the company intends to invest in a US warehousing and machining facility with a capex of ₹1 billion starting in H2FY24. There is visibility of an increased order book from prominent clients such as Cummins and an electric vehicle manufacturer.
- Furthermore, Sansera Engineering is allocating a portion of its margins towards investing in new-generation products outside the automotive sector, on an experimental basis. This includes investments in radar technology to tap into the revenue potential of advanced driver-assistance systems (ADAS).
Metrics in a nutshell
The company is on track to achieve its FY24 revenue growth target of around 40% in exports, equivalent to over ₹6.5 billion. During Q1 FY24, the company achieved a 24% YoY revenue growth, reaching ₹660 crore, and reported a consolidated net profit of ₹45 crore, representing a 30% YoY increase. As of June 2023, the company’s order book with annual peak revenues stood at ₹16.9 billion.
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