Sundram Fasteners Q4 Results Review - HDFC Securities

Mr. Aditya Makharia, Institutional Research Analyst, HDFC Securities

Healthy performance; exports to drive revenue

Sundram Fasteners' (SF) 4QFY21 EBITDA was 10% above our estimates (as consolidated margins came in at 18.6%). The company reported healthy topline growth (+12% QoQ) as it benefitted from its diversified portfolio across domestic/overseas markets (exports are c.35% of revenue). We believe that SF's growth in FY22-23E will be driven by exports as the new plant ramps up (which can potentially add 6-8% to the topline). We reiterate our ADD rating and are raising estimates by ~15% over FY22-23E to factor in the better- than-expected margin outlook. Our target price is revised to INR 750 as we value the stock at 27.5x FY23E EPS (~10% premium to average 5-year multiple).

4QFY21 financials: (1) Standalone: Revenue at INR 10.79bn grew 15% QoQ. Domestic sales (INR 7.13bn) grew 12% QoQ, whereas exports (INR 3.37bn) grew at a healthy 22%. EBITDA margin at 19.5% was lower 200bps QoQ (+310bps YoY) as the RM cost increased by 50/225bps YoY/QoQ, due to higher commodity prices. PAT at INR 1.30bn grew 5% QoQ. (2) Consolidated: Revenue from subsidiaries grew 16% QoQ, which led to the overall growth of 53/15% YoY/QoQ in consolidated sales. Revenue came in at INR 12.7bn. EBITDA margin at 18.6% while lower 220bps QoQ (+380bps YoY) was significantly above our estimate of 17.5%. The company's superior product mix/improved cost efficiencies have enabled margins to sustain in the high teens. Adj. PAT at INR 1.41bn was flattish QoQ.

Key highlights: (1) International business outlook is encouraging: Standalone exports grew 22% QoQ (vs. 11% for the domestic segment). Chinese subsidiaries' quarterly revenue exceeded INR 1bn for the first time. We expect the overseas demand to remain resilient as several countries are now opening up. (2) New plant ramp-up: SF's new plant is likely to scale up over FY22-23E and can contribute to an additional 6-8% to revenue. (3) Commodity cost pressures: To counter the impact of rising input prices, the company is undertaking cost efficiency measures as well as raising product prices. We are modelling in margins of 18-19% over the next two years. (4) Capex: The company has incurred a Capex of INR 1.4bn in FY21.

Shares of SUNDRAM FASTENERS LTD. was last trading in BSE at Rs.724 as compared to the previous close of Rs. 725.6. The total number of shares traded during the day was 9817 in over 821 trades.

The stock hit an intraday high of Rs. 748.25 and intraday low of 720.05. The net turnover during the day was Rs. 7211698.

Source : Equity Bulls

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