We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.

INVESTING RATIONALE

• Suprajit has consistently outperformed industry on revenue/EBITDA CAGR over the past decade, while maintaining RoCE at ~25%. Domestic cable segment grew in line with the automobile industry with both exports & aftermarket clocking strong double digit growth. Management indicated company has received new orders from European OEMs (VW, BMW, Daimler and Ford) for supply of cables and it is doubling the capacity over next 2 years to 50 mn cables (17% of total capacity)

• New product to increase content per vehicle supplied: The company has bought technology to start supplying CBS (Combined Braking System) module and is working with various OEMs to get it approved. CBS is mandatory from FY19/20 on all newly launched/ manufactured two-wheelers respectively with engine capacity of <125 cc.

• Next leg of growth will be led by (1) gain in global non-auto cables market; (2) increase in content supplied (CBS opportunity) in India; (3) market share gains in aftermarket (both cables & halogen lamps) & (4) inorganic opportunity to strengthen its core cable business.

• Wescon, it’s US subsidiary, closed FY18 (first full year of operations post acquisition) with revenue of ~USD 40 mn (Rs 26 bn) and 16% EBITDA margin. Management remains confident of achieving double digit growth in the segment (vs. 2-3% industry growth) as it enters new verticals. Revenue growth for Phoenix Lamps, its another acquisitions, was flat for full year FY18, however EBITDA margin improved to ~14% (13.5% YoY). The company (Phoenix Lamps) is ramping up H7 (product) line and has received new OEM approvals with exit capacity utilization at 45%.

• We maintain a BUY with a target of Rs.265.