As of today, I have added 2% position in Suprajit Engineering to the model portfolio, bringing down the cash level back to zero. Its an unusual auto ancilliary company with higher margins (of 14-16%) compared to peers (~10%). Their focus on after market has enabled them to earn higher margins. Management of Suprajit are hungry, CEO is young, and they have managed to compound sales by 20% for a very long period of time. They are still very small in the broader context, being only leader in cables business, and currently trying their hands in lights business. EV doesn’t impact them as quantum of cables are same in an electrical vehicle, and EVs need lights. My naive projections are below.
FY20 sales: 1563 cr., assuming FY21 sales will be 1500 cr., @15% growth FY25 sales: 2623.51 cr.; To sell at 2.5x sales; EV ~ 6559 cr., Debt for FY20 was 391 cr., Debt in FY25 will probably compound at the same level as increase in sales (in sync with past) ~ 391*1.15^5 ~ 786 cr., Mcap ~ 5773 cr. (share price: 413). From current level of 166, the future potential returns are ~20% (+1% dividend yield). If price drops to 100-125 or growth improves, I will increase my position size. The updated portfolio is below.
