Strong growth potential ahead, Maintain BUY!
Overall performance was better than our expectations, especially on PAT front owing to lower tax. The performance was good led by outperformance in PV. Subsidiaries reported good performance led by strong PV growth which outperformed industry growth. Overall, management is optimistic about the upcoming fiscal year, citing strong growth momentum from cross-selling opportunities, improving exports, introduction of new products (especially Cover glass), and a trend towards premiumization. SJS is strategically expanding and growing faster in the exports market, with exports expected to increase from around 8% to 15% of consolidated revenue in three years. The standalone business is set to outpace industry growth due to the addition of the Cover glass product and strong performance from key clients like TVS, Bajaj, HMSI, M&M, Whirlpool, etc. Subsidiaries also have healthy growth prospects, with Exotech’s new plant coming online by H1FY26E, aiming to double revenue, and WPI receiving RFQs from domestic and global clients. Overall, Consolidated EBITDA margin is expected to improve due to increased exports, the introduction of high-margin products, and scale benefits. We anticipate a CAGR of approximately 22% in revenue, 24% in EBITDA, and 28% in PAT from FY25-27E. The company has already repaid its full long-term debt last quarter, which has benefitted in lower interest costs. We have slightly revised our estimates downwards factoring lower other income for the next 2 years. We maintained 22x multiple on FY27E EPS of Rs 60.3 to arrive at a revised fair value of Rs 1,327 per share. Therefore, we maintain our BUY rating on the stock.
Q4FY25 Result Analysis – Good performance, lower tax outgo boosted PAT
• Consol performance was largely in line with our estimation. The company reported 7% YoY & 12% QoQ sales growth. A small revenue beat was largely on account of slightly higher than est. growth in subsidiaries (Exotech + WPI) led by good growth of its key customers while standalone revenue was nearly in line with estimates.
• The EBITDA margin slightly miss est. by 51 bps largely on account weaker margins in standalone business, impacted due to higher employee cost, while the same was largely offset due to higher margins in subsidiaries which came at 22.2% vs est. 20.6%. PAT outperformance vs. est. is attributed largely to lower taxes and lower finance cost.
• The company reported softer Q4 exports growth due to muted demand in Europe and North America, however, the management is optimistic of demand recovery in near term. SJS is strategically expanding its exports into new markets, adding new clients, and securing a significant order from a global OEM. The goal is to increase exports’ contribution from ~8% to 14-15% within 3-4 years.
• The company has already repaid its full long-term debt and benefitted on the interest cost during the quarter. Interest cost reduced from ~Rs22mn in Q4FY24 to Rs7mn in Q4FY25. Exotech has commenced capacity expansion, with a new plant targeting commissioning by H1FY26.
