Sansera Engineering Ltd Stock Research Report

RIGHT CAPITAL ALLOCATION STRATEGY TO SUPPORT FUTURE GROWTH……

Sansera Engineering (Sansera), incorporated in 1981 and headquartered in Bengaluru, is a technology driven manufacturer of complex and critical high-precision iron and aluminium components for automotive and non-automotive sectors. It is the largest supplier of Connecting Rods, Rocker Arms, and Gear Shifter Forks for the 2W segment and the largest supplier of Connecting Rods and Rocker arms for LMV in India. With a strong presence in the high precision IC engine components, it extends its design and engineering capabilities to cater to fast-growing areas like EV, Defence, and Aerospace. It has 17 integrated manufacturing facilities (16 in India and 1 in Sweden) and has evolved organically by supplying premium quality components to Auto ICE, Tech Agnostic, xEV, and Non-Auto OEMs globally.

Key Rationale

◼ New Orders and Customer Additions:

Sansera maintains a healthy order book, with annual peak revenues of Rs 2,005 Cr (Rs 320 Cr in Q2FY25), with 51% of orders coming from the Non-Auto and Auto Tech Agnostic and EV segments. 60% of the orders are international. The company has signed an MoU with Dynamatics Technologies Ltd to manufacture Airbus A220 aircraft door assemblies, which is expected to generate Rs 50 Cr in annual orders starting from FY26.

◼ EBITDA Margins:

Supported by a strong order book, management is confident of achieving 20% margins in the long term. We conservatively expect the company to deliver 17-18% margins in FY25/26/27E, with projected EBITDA/PAT growth of ~18%/25% CAGR over FY24-27E. This anticipated growth is driven by a shift in the sales mix towards non-Auto ICE components, higher capacity utilisation, growth in the export business, volume expansion, and a recovery in Swedish operations driven by enhanced operational efficiency.

◼ Annual Capex to Drive Growth:

The company incurred a Capex of Rs 294 Cr in H1FY25 and with a strong order book. The total planned Capex for FY25 is around Rs 450 Cr, with 60% allocated to Tech Agnostic EV and Non-Auto products. Additionally, Sansera has entered into an MoU with the Karnataka government to acquire 55 acres of land for greenfield expansion.

Sansera Engineering Ltd Stock Research Report

◼ Capacity Expansion:

The commissioning of a 4,000-ton press is expected to begin and ramp up in H2FY25. This will support Sansera’s move into the higher-engine non-automotive category (18 to 20-litre engines), with components catering to customers such as Cummins, JTV, Kohler, Lieber, and CNH.

◼ Growth Across Geographies:

Domestic revenue grew by 8% YoY, while international business saw a 15% YoY increase. Sector-wise, non-Auto revenue declined by 20%, whereas Auto-Tech Agnostic and EV recorded a 53% growth, driven primarily by ramped-up order execution for North American-based xEV customers. The Auto ICE segment grew by 9%, with the top 5 customers contributing 46.2% to the overall business.

◼ Valuation & Outlook:

In light of attributes such as a) Higher sales mix in Non-Auto ICE components, b) Higher International business (exports), c) Focused approach on improving margin trends, d) The company’s capability to generate strong operating cash flows, and e) Capacity expansion plans, we expect Revenue, EBITDA, and PAT to grow at CAGR of 15%, 18%, and 26% respectively over FY24-27E.

◼ Key risks: a) Macro Economic Uncertainty, b) Business skewed towards ICE vehicles.

Key Financials (Standalone)