Interview with Ajith Rai - MD
disc - invested in this stock.
Highlights of the call by Caital Mkt:
For the quarter ended June 2014, Suprajit Engineering registered a good 30% rise in consolidated sales to Rs 141.27 crore. OPM improved 10 basis points to 14.3% which lifted OP 32% to Rs 20.23 crore.
PBT grew 18% to Rs 15.76 crore.PAT grew 19% to Rs 10.66 crore.
Thecompany has won “GM’s Supplier Quality Excellence Award” for the third year in a row. The company has been receiving several awards but its good to receive it three times in a row from GM.Automotive and non-automotive exports business out performed with a robust growth during the quarter.Construction activity for plant expansion is in full swing at the Pathredi Plant of the company.
Revenue mix:
2 Wheeler accounted for 54% against 55% in June 2013 quarter.Non-2-wheeler Automotive accounted for 31% against 29% in June 2013 quarter.Non Automotive accounted for 6% against 5% in June 2013 quarter.After market accounted for 9%.
Overall global business grew from 14% to 18%. Domestic business stood at 82% in June 014 quarter. Around 7-8 years ago the same stood at 1%.
HMSI is in talks with the company to set up a plant close to its plant in Gujarat and the company is giving serious thought.to it.Wage cost has increased due to increase in minimum wage. This has been across all states. This has impacted the margins.Q1 is worst for the company, Q3 is the best, Q2 is second worse and Q4 is second best.Other income is coming down because the company has not booked its growth option in the debt fund.Export is gaining traction. Exports are driving subsidiary numbers.Exports in Q1 grew 60% even though on a small base.
Break up of exports:Non auto business
70% was to US;.20% to Europe;10% Japan.
Auto business;60% to Europe;30% to North America;10% Rest.
Cable business is 95% and rest is non cable business.
The company has capex plans of Rs 65 crore till March 2016 for its three plants. Capacity will increase from current 150 million to 200-225 million after capex.However due to various steps taken the capacity will increase to around 160 million by September 2014 and 170 million by the end of FY 2015.
The management does not give guidance but said it will beat Industry growth. In June 2014 quarter it grew by 30% while industry grew by 12%. The management feels it is possible to grow in double digits this year.Margins in exports are around 100 basis points higher than domestic sales. Margins is expected to be same going forward.
Non auto business has higher margins because of its niche products. But this is a very small part of the overall business. Non auto margins can witness improvement in its margins.Total global automotive cable business would be around 3 billion dollars. Non auto business could be around 200-300 million (the management is not sure about the numbers of non auto cable business).
Results Out:
http://www.bseindia.com/xml-data/corpfiling/AttachLive/Suprajit_Engineering_Ltd_301014_Rst.pdf
**K Ajith Kumar Rai, CM & MD of the Co add the call.**Highlights by Capital mkt;
Sales grew 26.13% to Rs 319.05 crore in six months ended September 2014.This is against domestic auto industry growth of 13-14%.Global business now accounts for 20% against 13-14% last year.EBIDTA grew 24.20% to Rs 45.14 crore.PBT grew 13.52% to Rs 35.62 crore.PAT grew 14.61% to Rs 24.99 crore
The company has seen some cyclical variations from aftermarket business. .Onetime restructuring cost of Rs 50 lakh charged in P&L. That is why there is fall in profit margin in standalone entity. Going forward there will be no more one time restructuring costs.Suprajit Engineering is India’s largest automotive cable maker with an annual cable capacity of 150 mn cables.The group has 15 plants; 14 in India and 1 in the UK, which also operates as a Tech Centre.Its customer list includes most Indian automotive majors. It also exports to many marquee global customers.
The speedo cable assets of Pricol, Coimbatore, acquired under slump sale basis, have been moved to a new location at Bommasandra Industrial Area, Bangalore. All the equipments have been installed, trial runs were conducted and commercial production has started during October 2014. The company expects to consolidate this business and grow in the coming years.
Aftermarket cable operations at two separate plants have been regrouped into a single larger plant in Bommasandra Industrial Area, Bangalore. This is done to achieve better efficiency and focused management. The relocated plant has gone into full production during September 2014.
One of the plants recently vacated, has been identified to house the company’s Tech and Innovation Centre in the future, after reconstruction. A senior Tech Centre Head has joined the company and the operations of the Tech Centre have started at the current Corporate Office, pending relocation in due course.
The company is in advanced stage of planning to set up a Tech and Business development centre in the US. This is expected to be in place within the next 3-6 months.The company is trying to see if they can service OEMs in European markets.
The company has pursued its discussions with well-known European companies to explore and exploit the European aftermarket for cables, as a new business segment. This is expected to be in place in the next 3-6 months time.
Subsidiaries continue to perform well as visible in the consolidated results of the company. In view of certain recent changes in the Companies Act, Suprajit Automotive Private Limited has appointed Messrs. Haribhakti & Co., LLP, Chartered Accountants, as its statutory auditors.The capacity expansion plan at Pathredi is in advanced stage of completion. Building activates are expected to be completed by December 2014 and commercial production will start during Q4 2014-15.
The company’s proposal to setup a plant at Vallam-Vadagal, SIPCOT Industrial area, has been cleared by single window agency Guidance Bureau. The construction activities are expected to start during November 2014.
The company has approached Gujarat Industrial Development Corporation for additional land in and around Sanand / Ahmedabad to setup a cable plant. The company is looking at this place to expand seriously which was not there in previous plans. This is to service companies in and around Sanand area. How asked for 3 acre (at a cost of around Rs 5 crore) land from government for green field plant.
On completion of these 3 plants and balancing equipments at other plants, the group’s annual capacity is expected to reach 225 million cables in line with earlier communication.Margins are not as expected due to unorganized players. Once GST and other tax compliances are in place the company expects to get some of its margins back.
Second half will be slightly weaker than the first half for the auto industry. Also Maruti Chairman has said this in TV interview.Domestic business accounted for 80-81% in first half.2 wheeler accounted for 54% in first half.Auto accounted for 31%.Aftermarket accounted for 9%.Non automotive accounted for 8% and it grew 45% in H1.
Since European market is weakening (OEM sales is tepid) the company is also looking at North American market.Raw material prices are fairly stable at the moment but cannot say the same with confidence for next 2 quarters.
The company did not add any new customer in the quarter. Existing customers have given business and growth.
**K Ajith Kumar Rai, CM & MD of Co add the call.**Highlights by Capital Mkt;
For the quarter ended December 2014, Suprajit Engineering registered a 2% rise in consolidated sales to Rs 162.83 crore. OPM fell 330 basis points to 15.5% which saw OP falling 16% to Rs 25.19 crore. PAT fell 26% to Rs 11.96 crore.
For the nine months ended December 2014, consolidated sales grew 17% to Rs 456.96 crore. OPM fell 160 basis points to 15.4% which saw OP growing 6% to Rs 70.33 crore. PAT fell 3% to Rs 36.95 crore.
The quarter did not have any price increase.The company’s 2 wheeler dependence came down.Around 80% comes from domestic business and 20% global business. This was 86% and 14% last quarter.
Construction is at the final stages in Patherdi plant for the proposed cable expansion. Patherdi will be in place by March 2015.In two - three years time Patherdi plant will be bigger than Manesar plant.Construction activity is at full swing in the company’s Vallam-Vadagal cable plant. This Chennai plant will start by Dec 2015.Sanand plant will start in December 2015 or March 2016.On completion of these 3 plants and balancing equipments at other plants, the group’s annual capacity is expected to reach 225 million cables in line with earlier communication.
Honda has 30% of share of business. The company has clearance for more products. Will have 50% of share from next year.The company Euro exposure has got hit.After market off-take has been negative in this quarter.The company has no threats from Chinese imports. People have tried Chinese goods and are no more interested.
Productivity improvisation and automation, due to increasing cost of labour, is the focus point for the company now. The company is also working on other internal efficiencies.
Its good that part of commodities have dropped.
Most of the capex that will happen will be growth capex to increase production capacity and automation.
The company is trying to see if they can service OEMs in European markets.The company has pursued its discussions with well-known European companies to explore and exploit the European aftermarket for cables, as a new business segment. This is expected to be in place in the next 3-6 months time.
Euro weakening is problem for anyone dealing with Euro. The company is lucky that it is not exclusively dealing in Euro.
The company gained market share in automotive market from 29% to 32%. The management sees more opportunities in Automotive business as big companies in two wheeler are struggling.It plans to bring down dependability on 2 wheeler from 52% to below 50% and increase Automotive business from 32% to 35%.
Export oriented unit is no more enjoying tax benefit. That is why tax rate has gone up.
The company has decent luck in introducing new products in the after market. It has fairly good acceptations like filter, mirror, speedometer, fuel tank units, etc in the aftermarket business. These will be ramped up going forward. The company had less success in OEMs for these products, except for the speedometer business.
The company will look at good opportunity to channel the cash on its books. It had proposals in the past but nothing happened. The management feels that it is time for the company to look at new opportunities in the same line of business of auto component.
The company will certainly be able to grow 5% higher than the industry.
Margins will be impacted by Euro, employee inflation etc.
Market share in India in two wheeler its 65%, in automotive its 25-30%. In AM is difficult to estimate.Long term debt equity is modest at 0.25.
Company looking for QIP. Memebers please share having any info on this.
CONFERENCE CALL - from Capital Markets
The combined entity will have a strong balance sheet, along with an excellent OEM customer base and in-depth aftermarket reach
Suprajit Engineering held conference call on 20 April 2016 to discuss merger of Phoenix Lamps with itself.
K Ajith Kumar Rai, Chairman & Managing Director address the call.
Highlights of the call:
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Phoenix Lamps is the subsidiary of Suprajit Engineering wherein Suprajit currently owns 61.93% of Phoenix equity shareholding. The merger ratio has been set at 4 shares of (Re.1/- each) Suprajit for every 5 shares of (Rs. 10/- each) Phoenix in line with SEBI regulation.
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Post merger, Phoenix Lamps will operate as a separate division of Suprajit Engineering and will continue to market itself under the brand of ‘Phoenix’.
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Phoneix has embarked on mordenisation plan. It has received first machine which has been put to use and commissioned. Second machine have come to the Bombay port. Confident that will install and commission it by the end of FY.
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The company has finished first phase of restructuring of foreign subsidiaries. Phoenix Lamps now holds 100% stake in Trifa and Luxlite, its subsidiaries
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Won’t talk on financial numbers of last quarter but both the companies have performed satisfactorily.
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Suprajit said the consolidated sales of combined entity for the current year are expected to be in excess of Rs 1,100 crore with good financial ratios.
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This merger will bring significant synergies together.
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The combined entity will have a strong balance sheet, along with an excellent OEM customer base and in-depth aftermarket reach.
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This will also enhance cost efficiencies at various levels, better management bandwidth and reduced compliance requirements. This will be a win-win for both companies.
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The company spent around Rs 155 crore for the purchase of 61.93% stake of Phoenix.
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Dilution for Suprajit in this deal is 6%.
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Both Suprajit and Pheonix are confident of the future.
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FY 2015 was a year of de-growth at phoenix due to historic reasons. Those problems are now behind the company. Now growth will take place. As and when this merger completes, Suprajit as a consolidated entity with phoenix will grow at around 5-10%.
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In after market (AM) Suprajit is strong in South and phoenix is strong in North and in East both are in between. So the merger will help both the companies to grow its AM business.
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The deal will be cost efficient for both the companies.
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Most of the Phoenix stakeholders were not happy with the merger and thought that they were shortchanged.
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Nearly 65-70% business of Phoenix is after market. Entire international market bossiness is AM. Only in India the business is in OEM space.
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Phoenix has a strong market share in Europe.
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Capacity of Phoenix Lamps is about 82 million lamps and it produced 50-55 millions in FY 2015. So there is decent prospect to improve productivity without capex. But now the capex is being done to improve the quality.
CONFERENCE CALL - from Capital Markets
The Merger between Suprajit and Phoenix is awaiting clearance from Sebi
The company held its conference call on 31st May’16 and was addressed by key management
Key Highlights
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Of the total installed capacity of around 200 M cables, Suprajit produced around 157 M in FY’16. The capacity is expected to increase to around 225 M cables by end of FY’17 as the capacity addition program in Chennai and Sanand plant comes to an end. Management expects remaining capex of around Rs 15-20 crore to be spent in Suprajit.
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Suprajit consolidated (other than Phoenix lamps) has reported a Ebidta margin of around 16.5% for FY’16 an improvement of around 180 bps as compared to FY’15. Lower raw material costs and better efficiencies have resulted in higher margins. Management is confident of maintaining the margins in a band of around 15-16% going forward.
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Of the total consolidated revenue of Phoenix lamps around 65% comes from exports and rest from domestic market. Of these 65% of exports more than 55% is from EU markets where the products are exported to EU subsidiaries and rest are direct exports and aftermarkets.
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Of the total consolidated revenue of Suprajit Engineering (other than Phoenix), around 81% of sales is from domestic market and rest is exports. 52% of total sales come from 2 W, 33% from automotive segment, 10% from after markets and rest from non automotive space.
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Of the total consolidated revenue of Suprajit (including Phoenix), around 66% of sales is from domestic market and rest is exports. 40% of total sales come from 2 W, 25% from automotive segment, 32% from after markets and rest from non automotive space.
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Phoenix lamps have completed restructuring of both 2 subsidiaries namely Luxlite (in Luxembourg) and Trifa (in Germany). There was around Rs 20 crore of impairment losses due to that.
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So Phoenix started to do well at consolidated level from Sep’15 onwards. As per the management, while lot of restructuring and cleaning process is completed, the exercise is a continuous process and will be over by end of FY’17. Till then Phoenix should show its improved performance every quarter on QoQ basis.
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The Merger between Suprajit and Phoenix is awaited from Sebi and hence no further updates on merger were shared by the management and nothing was discussed as well.
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Suprajit continued to outpace the industry growth, which grew by around 3% in FY’16 while the company grew by around 13%. As per the management, April and May 2016 were very good for the industry and Suprajit continued to outperform its business in these 2 months as well.
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Government has in Dec’15 passed an order on additional light parameters for lamps and certain additional features to be provided with the lamps as compulsory for heavy transport. This will bring in additional replacement demand from OE players in India.
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The Other expenditure for the Mar’16 quarter included some one off expenditure like Rs 4 crore expenditure towards QIP which happened in Feb’16, some discounts to customers which are settled in year end, CSR expenditure etc.
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Going forward, new products, newer export markets and geographies, leverage of markets between Suprajit and Phoenix will drive the growth.
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For Phoenix, after markets business will continue to be better and so is the exports of Automotive will be good. However, the Non-Automotive export market will continue to struggle. The company is predominately in North America and is aiming for newer markets like South America and others.
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Capex for Phoenix will be around Rs 30 crore for FY’17
Phoenix is mainly into halogen lamps while popularity of LED lamps is growing in automotive markets (and in residential as well). Although LEDs are expensive than Halogen lamps, I think growth will come from LED segment as costs will continue to drop. If this assumption is true, how do we asses growth potential of Phoenix and consequently that of Suprajit? What was the value proposition for Suprajit in this acquisition? Was it just low cost (P/E) of Phoenix?
It’s cable business is doing good but this high valuation needs some growth drivers and I am struggling to find some. this company has the potential to be next Motherson.
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From the recent announcement, the merger helps create a better synergy per mgmt. -
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/94026E60_92DF_4CDA_8F6C_7132CEBB32A9_145633.pdf
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Thanks for posting the the release. This is the management perspective and it will be rosy. I am looking for some neutral opinions from boarders here.
Suprajit Engg. has declared good result. See update in below link …
http://www.suprajit.com/sites/default/files/financials/Outcome%20of%20Board%20Meeting.pdf
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Hello All,
Find June 2017 Suprajit Investors presentation in below link.
http://www.suprajit.com/sites/default/files/financials/Investors%20ppt%20June%202017.pdf
13th Sept 2017 is record date for Pheonix Lamp share swap with Suprajit. Finally the date is fixed for this share swap.
4 Suprajit shares of Face value Rs.1 will be issued to 5 shares of Pheonix Lamp of Face value Rs.10
http://www.moneycontrol.com/stocks/reports/phoenix-lamps-revised-record-date-8671241.html
Suprajit Q2- Significant drop in Top Line. Management always gave a guidance of 10-15% higher than the Industry. But it is missing this time. Anyhow Wescon gives good nos between Jan-July period
Margin is good
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In Suprajt Engg stock Good Technical break out has happend today. Stock trading at life time closing high of Rs.340.The technical breakout can take the stock price to much higher level. Long term Investors can hold the stock for few more years for a decent gains.
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Good Q4 result expected as per below article , prediction by hdfc security
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Am I missing something about this stock from sales to cash flow everything looking to be improving and better post GST
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Suprajit has published their result today and result is looking good…