PL Stock Report: Sansera Engineering (SANSERA IN) - Visit Update - Non-ICE businesses should gain prominence - Not Rated

Sansera Engineering (SANSERA IN) - Himanshu Singh - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: Not Rated | CMP: Rs922 | TP: NA

Visit Update - Non-ICE businesses should gain prominence

Quick Pointers:

♦ Diversification towards non-auto, xEVs to help grow at a faster rate.

♦ Auto expertise helping with diversification in related non-auto business.

We visited Sansera Engineering’s (SANSERA) plants including the new aerospace plant at Bengaluru. The company is witnessing increase in capacity utilization after a low utilization phase over the last few years, due to downturn in the end-user industries and is now increasing focus on diversification. SANSERA has built long-term relationships with its customer by offering high product quality controls, shorter development and delivery time and end to end product offering. The company is ramping up its aluminum business, with three new lines expected to commission over the next 12 months. The aluminum business is seeing faster growth, led by industry tailwinds helping SANSERA with its diversification objective. The new Aerospace plant will ramp-up the revenue by +50% over next two years with peak revenue potential of Rs. 3.5bn. Also, the company remains confident of growing 2x faster than the industry in its ICE segments.

While we like SANSERA’s efforts in mitigating its risk, however, significant portion of its revenue is exposed to electrification. Strong orderbook with high exposure to non-ICE segment and global trend of Europe+1 and China+1 should help cushion the risk in domestic market (as it ramps-up exports). The company has set an objective of 20-20-20; which is 20% revenue growth, 20% EBITDA margin and 20% ROCE for the medium term. The stock trades at 26.2x FY23. Not Rated.

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