Institutional Equities

Sansera Engineering
26 June, 2022

Reuters: SASE.BO; Bloomberg: SANSERA IN

Robust order wins; Focused on diversifying product profile NBIE Values your patronage- Vote for The
Team in the Asia Money poll 2022. Click
We met the management of Sansera Engineering Ltd - Mr. B.R. Preetham, CEO and Mr. Vikas here
Goel, CFO at their Unit 11 plant in Bengaluru to understand the company’s growth prospects,
threat from EV transition, overall business environment and outlook.
The key takeaways include: (1) Order book stands at ~Rs15bn (Rs12.5bn in Sept’21) (2) Order NOT RATED
wins focussed at diversifying away from the domestic ICE segment (~61% exports and ~38%
from EV+Tech agnostic products) (3) Expects to outperform industry growth by ~5-10% going
Sector: Auto Ancillaries
ahead. and (4) Major growth drivers are Non-Auto sectors (Aerospace, Agriculture, Off-road, CMP: Rs.660
Bicycles and Defence) and tech-agnostic products (17% in FY22). The company aims to take
this share to ~40% in 5 years. (5) Semi-conductor shortage issue is likely to be resolved from
July’22 onwards. However, with risk of a recession in the US and the UK, the company remains Varun Baxi
cautious about its exports business (6) Strong backward integration in terms of control over Research Analyst
forgings and SPM development capacity differentiates Sansera Engineering from competition varun.baxi@nirmalbang.com
and helps it to achieve higher margins. +91 97693 68077
We like the company as a franchise, led by its strong engineering and execution capabilities
and expect it to outperform industry growth on a sustainable basis. Key Data
Company Update

Strong revenue visibility on the back of robust order wins: Revenue visibility remains strong with new Current Shares O/S (mn) 52.6
order wins at Rs15bn (peak revenue potential), with 245 LoIs/POs from 66 customers in the Automotive Mkt Cap (Rsbn/US$mn) 34.7/443.2
sector (9 for xEVs) and 33 customers from Non-auto sectors. It has also won orders worth Rs3bn from US-
52 Wk H / L (Rs) 890/548
based OEMs for con rods. Also, in May’22, it has secured business worth Rs400mn from the Defence sector
(FY24). Daily Vol. (3M NSE Avg.) 95,414
Non-Auto and xEV to drive next leg of growth: It is looking to diversify from ICE components (83% of
revenue in FY22 to ~60% in 5 years) by increasing the share of xEV and Non-auto sectors. The company is Price Performance (%)
setting up a dedicated plant for Aerospace and Defence sectors and expects to do the business of ~Rs2.5bn 1M 6M 1 Yr
by FY24-end. Apart from this, the company sees significant opportunity from sectors like Off-road and Sansera Eng. (5.8) (12.1) -
Agriculture where it supplies several components like suspension, crankshaft assembly, connecting-rods etc.
It is also seeing a good traction in bicycle components from the US and the EU. For EV + Tech-agnostic Nifty Index (4.0) (8.1) (1.0)
products, it has developed several products like suspensions, stem comps, rotor etc. The kit value for the Source: Bloomberg
company is higher in EVs compared to ICE vehicles.
4QFY22 - Results
Backward integration and strong engineering capabilities help in winning new business: Sansera
Investors Presentation
Engineering focuses on high-precision machined components and it is a backward-integrated player with in-
house designing, forging, machining and painting capabilities, along with machine building capabilities (~1k
machines built till date). This helps the company in product development in co-ordination with OEMs, in
customisation capabilities and in maintaining consistent product quality and cost competitiveness, which help
it in winning new business.
Others: (1) The company is seeing revival in the Auto industry with chip shortage issue abating. (2) Expects
to grow at 5-10% ahead of OEM industry growth. (3) Plans capex of ~Rs2.5bn-3bn in FY23/FY24.

Y/E March (Rsmn) FY18 FY19 FY20 FY21 FY22

Net Sales 13,581 16,244 14,572 15,493 19,890
% Growth 33.4 19.6 -10.3 6.3 28.4
EBITDA 2,493 2,872 2,273 2,743 3,336
EBITDA margin (%) 18.4 17.7 15.6 17.7 16.8
Adj PAT 957 1,105 798 1,117 1,333
EPS (Rs) 18.2 21.0 15.2 21.2 25.3
EPS growth (%) 50.7 15.4 -27.8 40.0 19.3
P/E (x) 36.3 31.4 43.5 31.1 26.0
EV/Sales (x) 2.9 2.5 2.7 2.5 2.1
EV/EBITDA (x) 15.8 13.9 17.4 14.2 12.3
P/BV 6.0 5.2 4.6 4.0 3.4
RoCE (%) 19.6 19.1 10.7 13.2 14.3
RoE (%) 17.4 17.2 11.0 13.6 14.0
Source: Company, Nirmal Bang Institutional Equities Research

Please refer to the disclaimer towards the end of the document.

 Institutional Equities
Financials (Consolidated)
Exhibit 1: Income statement Exhibit 2: Cash flow
Y/E March (Rsmn) FY18 FY19 FY20 FY21 FY22 Y/E March (Rsmn) FY18 FY19 FY20 FY21 FY22
Net Sales 13,581 16,244 14,572 15,493 19,890 PBT 1,453 1,665 887 1,461 1,784
% Growth 33.4 19.6 (10.3) 6.3 28.4 Depreciation 608 705 939 1,017 1,197
Raw material 5,846 7,053 6,263 6,635 8,641 Interest 440 509 607 474 510
Staff costs 2,472 2,243 2,134 2,138 2,774 Other adjustments -30 -4 3 -115 7
Other expenses 2,770 4,076 3,901 3,978 5,140 Change in Working capital -719 -317 258 54 -938
Total expenses 11,088 13,373 12,298 12,750 16,554 Tax paid -377 -415 -255 -331 -429
EBITDA 2,493 2,872 2,273 2,743 3,336 Operating cash flow 1,374 2,143 2,439 2,560 2,131
% Growth 47.7 15.2 (20.8) 20.6 21.6 Capex -1,889 -2,381 -1,767 -1,351 -2,668
EBITDA margin (%) 18.4 17.7 15.6 17.7 16.8 Free cash flow -514 -238 671 1,209 -538
Other income 129 164 160 231 155 Other investing activities -184 -185 2 -47 72
Interest costs 440 509 607 495 510 Investing cash flow -2,079 -2,376 -1,771 -1,395 -2,553
Depreciation 608 705 939 1,017 1,197 Issuance of share capital
Profit before tax (before
1,575 1,821 887 1,461 1,784 Movement of Debt 2,189 2,113 1,042 -524 99
exceptional items)
Exceptional items (122) (157) - - - Dividend paid (incl DDT) - - - - -
Tax 584 671 84 363 465 Other financing activities -440 -509 -607 -459 -515
Adj PAT 957 1,105 798 1,117 1,333 Financing cash flow 979 185 -316 -1,392 465
% Growth 50.7 15.4 (27.8) 40.0 19.3 Net change in cash flow 275 -48 352 -226 43
Adj PAT margin (%) 7.0 6.8 5.5 7.2 6.7 Opening C&CE 106 343 239 600 365
EPS (Rs) 18.2 21.0 15.2 21.2 25.3 Closing C&CE 343 239 600 365 383
% Growth 50.7 15.4 (27.8) 40.0 19.3 Source: Company, Nirmal Bang Institutional Equities Research
Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 3: Balance sheet Exhibit 4: Key ratios

Y/E March (Rsmn) FY18 FY19 FY20 FY21 FY22 Y/E March FY18 FY19 FY20 FY21 FY22
Share capital 111 199 199 199 104 Per share (Rs)
Reserves 5,899 6,775 7,570 8,689 10,249 Adj EPS 12.1 18.2 21.0 15.2 21.2
Net worth 6,010 6,974 7,769 8,887 10,353 Book value 93.5 109.6 127.4 142.6 163.5
Total debt 4,719 5,177 5,272 4,429 6,451 Valuation (x)
P/Sales 3.4 2.6 2.1 2.4 2.2
Deferred tax liability
EV/sales 3.7 2.9 2.4 2.7 2.5
Capital employed 10,729 12,151 13,041 13,316 16,805
EV/EBITDA 22.5 15.6 13.8 17.3 14.0
Gross block 9,001 11,045 13,312 14,871 17,192
P/E 54.6 36.3 31.4 43.5 31.1
Depreciation 2,077 1,761 2,668 3,601 4,798
P/BV 7.1 6.0 5.2 4.6 4.0
Net block 6,924 9,284 10,644 11,270 12,394
Return ratios (%)
Capital work-in-progress 940 489 683 604 1,224 RoCE 15.5 19.6 19.1 10.7 13.2
Investments 7 5 40 43 111 RoE 13.4 17.4 17.2 11.0 13.6
Inventories 2,081 2,435 2,389 2,486 2,776 Profitability ratios (%)
Debtors 2,631 2,712 2,591 3,130 4,085 Gross margin 57.9 57.0 56.6 57.0 57.2
Cash 424 316 716 651 503 EBITDA margin 16.6 18.4 17.7 15.6 17.7
Loans & advances 981 1,006 867 866 531 PAT margin 6.2 7.0 6.7 5.4 7.1
Other current assets 264 356 351 239 585 Liquidity ratios (%)
Total current assets 6,380 6,825 6,915 7,372 8,480 Current ratio 1.1 1.1 1.0 0.9 1.1
Creditors 1,382 1,503 1,402 2,270 2,653 Quick ratio 0.7 0.7 0.6 0.6 0.7
Other current liabilities & provisions 2,140 2,949 3,839 3,702 2,752 Solvency ratio (%)
Total current liabilities 3,522 4,452 5,241 5,973 5,405 Debt to Equity ratio 0.7 0.8 0.8 0.7 0.5
Turnover ratios
Net current assets 2,858 2,373 1,673 1,400 3,075
Fixed asset turnover ratio (x) 3.7 1.7 1.6 1.2 1.1
Application of funds 10,729 12,151 13,041 13,316 16,805
Debtor days 68 63 60 66 67
Source: Company, Nirmal Bang Institutional Equities Research
Inventory days 49 47 51 60 57
Creditor days 31 31 32 36 43
Net Working capital days 86 80 78 90 82
Source: Company, Nirmal Bang Institutional Equities Research

2 Sansera Engineering
 Institutional Equities
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3 Sansera Engineering
 Institutional Equities
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4 Sansera Engineering