Dolat Capital's research report on Sandhar Technologies
Sandhar’s consolidated revenue de-grew 77% YoY to Rs 1.3bn, impacted by low production by OEMs due to lockdown across the nation. Consolidated EBITDA loss was at Rs 127mn due to negative operating leverage The current inventory is below normal and the company to accelerate production ahead of the festive season. Operations have reached 85- 90% of pre-Covid levels. As Hero and TVS Motors account for ~52% of overall revenue, we believe Sandhar would be a key beneficiary of quicker recovery in 2W led by rise in rural demand. In addition, increase in content per vehicle (Locking systems) and expansion in the product base with new order wins will augur well for the topline growth. Sandhar is also in advanced level discussions with new customers (for supplying ADC and electronic components), which will help de-risk client concentration and diversify its revenue base. The company has taken several cost control measures which will lead to reduction of fixed costs by 20%. Despite the fall in revenue, management expects margin to sustain at FY20 levels with effective working capital management and cost control measures.
Outlook
We anticipate a 17% EPS CAGR over FY20-23E and recommend Buy rating with a TP of Rs 269 (18x FY23E EPS).
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