- Suprajit Engineering Ltd. (SEL) is a market leader in Automotive Control Cables for the 2-wheeler segment with a 60% market share besides holding a 40% market share in the 4-wheeler space.Ramson (competitor co.) sales were 1.5x SEL sales in FY02 but in FY14 SEL sales were 5x that of Ramson’s.
- The company has been able to maintain its high market-share as a result of better cost competitiveness versus peers , due to its production proximity to its OEM customers.
- The company continues to target growth of 5% to 10% above the industry growth, buoyed by new product introduction in the aftermarket segment (both independent & OES route) and export growth ( 30% cost advantage over global peers).
- Company has received approvals from marquee customers like BMW, VW, John Deere etc and supplies small quantities to them, which has potential to grow exponentially.
- SEL has planned INR 65 cr capex each over the next 2-years for its 3 facilities, which will increase capacity to about 200-225 million cables.
- A faster–than-industry growth rate resulting in better market-share, cost competency versus peers and healthy ROCE of 38%, will augur well for the company going forward.
We recommend medium term Buy @ CMP of 135-140
