Q1FY24 Review: SJS Enterprises: Strong Q1; WPI to be EPS Accretive from Q2

31 Jul 2023 , 10:41 AM

SJS’ Q1FY24 Ebitda beat IIFL Capital Services estimate by 6%, driven by higher than-expected revenue, even as margins were in-line. The company continued to outperform the underlying auto industry, with its auto segment revenue up 19% YoY, higher than the volume growth of underlying auto industries (2W +1%; PV +7%). SJS added Toyota Tsusho and Autoliv as new customers in the quarter. New order flow from the existing large customers continued. WPI (acquired effective July 2023) saw strong revenue growth and margins in the quarter. WPI would be significantly EPS-accretive from Q2. Following completion of the acquisition in July 2023, analysts of IIFL Capital Services have now incorporated WPI numbers into their estimates. Analysts of IIFL Capital Services revised TP is Rs770, based on 2-yr forward PE. Retain BUY. 

Consol. Ebitda 6% above estimate: 

SJS’s Q1 Consol. rev grew 14% YoY and came in 6% higher than analysts of IIFL Capital Services estimate. Standalone (SJS) grew 14% YoY, while subs (Exotech) grew 16%. Gross margin improved 170bps QoQ to 56.9%. Ebitda margin rose 150bps QoQ to 24.1% (inline). Absolute Ebitda and PAT increased 11%/12% YoY. Ebitda beat analysts of IIFL Capital Services estimate by 6% while PAT beat was 12%, magnified by higher other income. 

SJS continues to outperform underlying auto industry: 

SJS’ revenue from the automotive segment grew 19% YoY. This compares favourably to 2W production, which was +1% YoY, and car production, which was up 7% YoY. Outperformance compared to the industry can be attributed to new order wins and sharp jump in exports (+90% YoY). In Q1FY24, SJS added Toyota Tsusho and Autoliv as new customers in the automobile segment. In addition, SJS won new orders from existing large customers such as Mahindra, TVS, Bajaj, Honda (2W), Hyundai, Visteon and Continental. Meanwhile, content per vehicle continues to rise and should support growth for SJS. 

WPI will add significantly to earnings: 

WPI clocked a revenue growth of 21% YoY and Ebitda margin of more than 30% in Q1FY24. WPI is not a part of Q1FY24 results. However, if WPI were to be included in Q1FY24 (on a pro forma basis), consol. revenue and Ebitda would have been 30% and 36% higher than reported numbers, respectively. WPI-led EPS accretion would be visible from Q2FY24.