Reviews

In this edition, we have reviewed Suprajit Engineering Ltd and Anupam Rasayan Ltd. We suggest our readerinvestors to HOLD Suprajit Engineering Ltd and Anupam Rasayan Ltd. 

We had recommended Suprajit Engineering Ltd in Volume 38, Issue No. 8 dated March 13, 2023—March 26, 2023, under the ‘Choice Scrip’ segment. The recommended price for the stock was ₹372.20. We had recommended the stock based on seeing growth opportunities, capex and positive EBITDA. 

Suprajit Engineering Ltd (SEL) was established in 1985 as a private limited company and later became a public limited company in 1995, meeting the demands of major OEMs in the sector. Suprajit is customer-centric and has achieved phenomenal growth, becoming India's largest manufacturer of automotive cables. With one of the largest manufacturing capacities in a specific country, it is committed to continuous improvement and defect-free manufacturing. In Q2FY24, Suprajit Engineering on a consolidated basis reported a 4.29 per cent increase in net sales to ₹708.87 crore as compared to ₹679.68 crore in the previous quarter same year and sequentially decreased by 1 per cent. PBIDT (Excluding other income) of the company decreased by 11.27 per cent to ₹69.81 crore as compared to ₹78.67 crore in the same quarter previous year and sequentially decreased by 2.36 per cent. The net profit of the company increased by 4.96 per cent on a QoQ basis to ₹34.76 crore and a YoY basis decrease by 24.02 per cent. 

At TTM, Suprajit Engineering is trading at a PE of 38.4 times, which is higher than its three-year median PE of 30.7 times. The company has maintained a healthy three-year average profit and sales of 8 per cent and 21 per cent, respectively. It has a three-year RoE and RoCE growth of 14.8 per cent and 16.4 per cent, respectively 

The company's CAPEX program for this year and next year remains around ₹140 crore, reshuffling to accommodate business changes. The tech centre is working on multiple products, including actuators, braking systems, and digital clusters. The company is investing in braking products and focusing on the LED retrofit business. The company expects challenges in the non-automotive segment to continue but sees growth opportunities in the Suprajit Controls Division, Domestic Cables Division, and Phoenix Lamps Division. The domestic two-wheeler business is expected to benefit from premiumisation in the industry. The passenger vehicles segment in India performed well, but the twowheeler segment is still struggling. Hence, we recommend HOLD. 

We had recommended Anupam Rasayan Ltd in Volume 38, Issue No. 10 dated April 10, 2023—April 23, 2023, under the ‘Analysis’ segment. The recommended price for the stock was ₹946.20. We had recommended the stock based on revenue growth, strong order book, and improving margins. 

Anupam Rasayan India is a leading company in India that specialises in the custom synthesis and manufacturing of speciality chemicals. Established in 1984, it has evolved into a leading manufacturer of life science-related and other complex chemicals for both Indian and global customers. The company focuses on developing innovative processes for complex chemistries and achieving cost optimisation. It operates in two business verticals: life science-related speciality chemicals for agrochemicals, personal care, and pharmaceuticals, and other speciality chemicals for pigments, dyes, and polymer additives. In Q2FY24, Anupam Rasayan’s consolidated revenue increased by 1.49 per cent at ₹392.15 crore as compared to ₹386.39 crore in the previous quarter same year. On a YoY basis, its revenue decreased by 0.16 per cent. The PBIDT excluding other income increased by 5.98 per cent to ₹107.48 crore as compared to ₹101.41 crore in the previous year’s same quarter. On a YoY basis, it decreased by 3 per cent. The company’s net profit stood at ₹48.69 crore as compared to ₹47.81 crore, a YoY increase of 1.85 per cent, while QoQ decreased by 6.81 per cent. 

At TTM, Anupam Rasayan is trading at a PE of 62.8 times, which is lower than its three-year median PE of 59.1 times. The company has maintained a healthy three-year average ROE and ROCE of 8.46 per cent and 11.2 per cent, respectively. It has a three-year compounded sales and profit growth of 45 per cent and 51 per cent, respectively. 

The agrochemical sector faces pricing pressure due to oversupply from China and excess channel inventory. Revenue growth in H1 increased by 11 per cent YoY, with higher visibility due to niche products and contractual demand. LOIs and contracts worth ₹7,669 crore provide strong revenue visibility. The company is maintaining its 20 per cent growth guidance with similar margins. Revenue growth is expected to be 15-25 per cent from existing molecules and the balance from new molecules and commercialization. Anupam Rasayan launched three new molecules in Q2 FY24. The company has signed three MOUs with Gujarat's government for afforestation. The company plans a capex of ₹670 crore, with ₹234 crore spent in Q2FY24. Working capital is expected to normalise in the next two quarters, and efforts are ongoing to reduce it. Hence, we recommend HOLD.

(Closing price as of January 08, 2024)