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ICICI Securities Report
Sansera Engineering Ltd.'s earnings remained hovered around Rs 400 million/quarter throughout FY22-FY23 due to weak demand from domestic two-wheelers/export markets impacting earnings growth. We interacted with the management to understand their outlook on business and their plans. Following are the key takeaways:
Company is confident of delivering ~20% revenue compound annual growth rate in FY23-FY25 amidst: recovery in export markets (likely more than 40% growth in FY24), recovering domestic two-wheeler market, and expanding aerospace business (~50% revenue CAGR in next three-four years.
Two-wheeler component operations are running at ~55% utilisation providing scope for margin and return on capital employed recovery.
Will be looking forward to execute new orders for global passenger vehicles original equipment manufacturers (such as an electric vehicle major from the U.S., JLR under exports, and Tata Motors Ltd. in India) from FY24.
Plan for machining facility in the U.S. with-effect-from FY25 is on (envisaged capex: ~Rs 800 million) though it would be on lease basis. It would help Sansera Engineering's revenue from Cummins India Ltd. to increase four-five times from the current Rs 850 million per annum.
Ebitda margin is likely to return to the 18-20% range with business scaling up across two-wheeler and aerospace segments, in parallel with falling input commodity and freight costs.
Rise of exports, aerospace business and EV parts in the overall revenue mix will likely enhance Ebitda margin for Sansera Engineering.
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