Smallcap stock: Suprajit Engineering shares, part of the S&P BSE Smallcap index, have moved within a Rs 78 band of Rs 375.5-453.5 apiece so far in 2024, coming within Rs 21.5 or 4.5 per cent of an all-time high registered in November 2021. Many analysts are positive on the auto ancillary stock citing factors such as the company's promising long-term growth strategy as well as the share of its cables unit in the domestic two-wheeler space, its pricing power in lamps, and its EV-focused product portfolio. 

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Here are five key things to know about the stock:

1. How the Suprajit Engineering stock has fared among its peers

Stock/index Return (%)
YTD One year
Suprajit Engineering 6.6 12.8
Bosch 34.6 66.9
Samvardhana Motherson 19.3 51.8
Tube Investments -0.9 28.6
Schaeffler India -10.6 -4.6
Sona BLW Precision 5.3 48.5
UNO Minda -7.3 26.5
S&P BSE Smallcap 5.2 60.9
S&P BSE Sensex 1.9 22.3

2. How analysts view Suprajit Engineering

Zee Business analyst Kushal Gupta recommends buying Suprajit Engineering shares for a one-year target of Rs 520 apiece. 

Gupta believes Suprajit is a good stock in the auto ancillary space. His target implies a potential upside of 19.9 per cent from the March 5 close, and 9.5 per cent beyond the all-time high of Rs 474.9 (November 16, 2021). 

Analysts at brokerage Equirus Securities expect the auto parts manufacturer's global cables division to outperform the industry with a CAGR of 12 per cent over FY24-FY26 on the back of strong order wins and stabilisation of operations. 

Brokerage Rating Target (in rupees per share)
Equirus Securities Long 485
Choice Broking Add 426
HDFC Securities Buy 463
Sharekhan Buy 430

Choice Broking holds an 'add' rating on the stock with a target of Rs 426 per share, citing attractive valuations and valuing the company at 19 times its estimated September 2025 earnings per share (EPS). 

Newly product launches, such as electromagnetic actuators, have helped Suprajit significantly increase its content per vehicle (CPV), a key metric used to determine the profitability of auto parts makers, while the company's braking division is aiding its growth visibility, according to Equirus Securities. 

The brokerage has retained a 'long' rating on Suprajit with a target of Rs 485 per share, citing strong traction in newer products and better-than-industry growth in its international business. 

Sharekhan values Suprajit at price-to-earnings (PE) multiples of 35.1 and 28.2 for FY24 and FY25 respectively. 

3. Key triggers and risks for Suprajit Engineering shares 

Equirus listed the following key triggers and risks for Suprajit Engineering shares, in a research report dated February 26: 

Triggers

  • Higher-than-expected growth in global business
  • Strong recovery in domestic auto volumes
  • Better pricing power

Risks

  • Continued slowdown in domestic two-wheeler space
  • Reduction in content due to shift towards EVs
  • Inability to pass on commodity cost inflation

4. How Suprajit Engineering fared in Q3 FY24

In February, Suprajit Engineering reported a consoldiated net profit of Rs 40 crore for the quarter ended December 2023 as against a consoldiated net profit of Rs 38 crore for the corresponding period a year ago.

Its revenue grew 4.6 per cent on a year-on-year basis to Rs 724 crore, according to a regulatory filing.  

Suprajit registered a 220-basis-point increase in its EBITDA margin in the December quarter on the back of gross margin expansion despite challenges, analysts at Sharekhan pointed out. 

Equirus analysts estimate the auto parts maker's overall margin to improve gradually going forward owing to a recovery in its global cable unit.

"As against earlier margins of 10-11 per cent, margins in the global cable business have been reduced 6.2 per cent mainly impacted by a huge drop in its non-auto cable volumes and due to few upfront costs related to restructuring of groups global cable business operations," the analysts wrote. 

5. What does Suprajit Engineering do?

Bengaluru-headquartered Suprajit Engineering, which started operations as a manufacturer of high-quality liner cables for the auto industry, has over the years diversified its product profile and consolidated market position across its product segments. It primarily manufactures mechanical control cables for the automotive and non-automotive segments, two-wheeler speedometers, and halogen lamps for multiple segments in the auto space.

(Disclaimer: The views/suggestions/recommendations expressed here in this article are solely by investment experts. Zee Business suggests its readers consult their investment advisers before making any financial decision.)

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