SJS Enterprises: IIFL Investor Conference

16 Feb 2024 , 11:07 AM

Analysts of IIFL Securities hosted senior management of SJS at IIFL’s Enterprising Bharat – 15th Global Investors’ Conference. Mgmt. is confident of 20% organic revenue growth in FY24 and maintaining growth at 1.5-2.0x underlying auto industry growth in coming years. Revenue drivers are growth in auto production in India, increase in content per vehicle and addition of new customers. There is some deceleration in growth due to slowdown in Auto production and Consumer appliances segments in India; however, this is not alarming. Being a niche segment with large open spaces for growth (exports, scale-up of chrome plating, etc.), the medium-term growth potential is robust. In Q2FY24, Walter Pack (WPI, acquired in July), saw a collapse in margins due to a customer specific issue. However, mgmt. expects WPI to make sustainable margins of 27-28% going forward. Exotech, which has been a play on domestic market, is now capturing exports opportunity. 

New offerings and increase in kit value to be key growth levers: 

Mgmt. expects SJS to continue to outperform underlying industry volumes (2W, PV), as it has done in the past. SJS is introducing new-age, premium products (IML/IMD, 3D appliques, lens mask assemblies, etc.) to improve value mix and drive growth. As per mgmt. there is scope for kit value per vehicle/ appliance to grow 1.5-2.0x in 2Ws and 3-4x in PV & CDs. 

New orders/customers flow healthy; exports well placed for stepjump: 

SJS has seen a steady flow of orders from new and existing customers. The fact that SJS has a wider product portfolio now (post acquisition of Exotech and WPI) should help SJS cross-sell to existing customers. Exports were on a growth path (2x in 3 years, FY19-22) before weak macro led to weakness in FY23. Exotech, which was a 100% play on domestic market, is now capturing the Exports opportunity, with its latest order-win from Whirlpool. Mgmt. is now focused on scaling exports to North America and ASEAN, where the opportunity is large. 

Capacity expansion plans in force; Strong FCF aiding debt-free goals: 

SJS aims to double Exotech’s Chrome Plating capacity to support revenues of Rs3.0bn from the current <Rs1.5bn. Higher capacity will also enable entry into global markets. SJS has been generating sufficient FCF to service debt obligations and expects to be net-debt free by H1FY25.