>SUPRAJIT ENGINEERING LIMITED: Added new customers like Volkswagen for Polo in India, BMW for Germany & Europe, Nissan, Palio, Arvin Meritor and Brozer (Germany)

Suprajit Engineering promoted by Mr Ajith Kumar Rai manufactures control cables, speedometer cables, speedometers etc for two wheelers and four wheeler industry. It also manufactures cables for non automotives and for replacement market. SEL commands 45% market share in the two wheeler segment and 35% market share in the four wheeler segment. The company’s current installed capacity is 110 Mn cables p.a. operating at 80% utilization.


Suprajit has grown at a CAGR of 19% during FY09-FY11. We expect it to grow by 20% and 25% in FY12E and FY13E respectively, on the back of capacity expansion and addition of new customers in the non automotive space. It is trading at 6.7 and 5.1 times its FY12 and FY13 estimated EPS. We have valued Suprajit 7.5 times its FY13 EPS arriving at a fair value of Rs 30 an upside potential of 47% from current levels.


■ Strong market share – Suprajit commands 45% market share in two wheeler segment and 35% in the four wheeler segment. It is a sole supplier to TVS and 80% of the cable requirements of Bajaj and Hero Moto is met by Suprajit.
■ Capacity Expansion to boost revenues – The company’s total current capacity is around 110 Mn cables p.a. operating at 80% capacity utilization. By Dec 2012, the company will be adding another 40 Mn cable capacity which will boost its topline going forward.
■ Addition of new customers – Suprajit added new customers like Volkswagen for Polo in India, BMW for Germany & Europe, Nissan, Palio, Arvin Meritor and Brozer (Germany). In the non automotive space customers like John Deere, Kubota, Club Car, JCB etc. will help in the next phase of volume growth.
■ Growth in high margin non automotive and replacement market – Suprajit is growing quite aggressively in the non automotive and replacement market segment where the margins are also higher as compared to automotive segment. In the non automotive segment the company commands 18% operating margins and in replacement market it enjoys 5% higher margins than in automotive space.
■ Strategic locations of plants - Suprajit has set up manufacturing facility at 8 different locations across the country to be close to its main customers in the North, West and Southern belts. Haridwar plant next to Hero Honda, Pantnagar plant next to Bajaj, the planned Sanand plant next to Tata Nano, etc. which gives Suprajit a logistic advantage.
■ Elite Clientele – In the two wheeler space the company’s major customers are TVS, Bajaj Auto and Hero Moto. In the four wheeler segment the company’s customers are Tata Motors, Mahindra and Mahindra, Hyundai, Ford and General Motors. Major exports customers are General Motors, Suzuki and Piaggio.
RISH TRADER