Suprajit Engg.

Suprajit Engineering reported a robust Q1 FY26, with consolidated revenue (excluding SCS) reaching INR 7,733 million, a 5.2% year-on-year increase. Consolidated EBITDA (excluding SCS) grew by 15% to INR 993 million, with margins improving by 100 basis points to 12.8%. Standalone revenue stood at INR 3,900 million, up 3.5%, though standalone EBITDA saw a 6.5% decline to INR 605 million, with margins at 15.5%. The company's group debt is INR 6,735 million, with investments in mutual funds and bonds at INR 2,568 million.

The Global Cables and Controls Division (SCD) delivered a strong quarter, with its EBITDA margin improving significantly from 8% to 12%. The recent acquisition of Stahlschmidt Cables (SCS) saw its losses significantly reduced, and management is confident it will be EBITDA positive by Q4 FY26. Integration efforts are progressing well, including the complete relocation of the Germany warehouse to Hungary and the closure of the Poland entity. The second tranche of the SCS acquisition, including China and Canada businesses, was completed in Q1, contributing one month of revenue.

The Domestic Cable Division (DCD) reported very strong revenue growth, outpacing the industry, and maintained a strong EBITDA performance. Aftermarket growth was particularly robust. Management noted that DCD's margins were impacted by higher IT, R&D, and corporate costs, which are bucketed into this division, reflecting strategic investments in global SAP HANA implementation and the Suprajit Technology Center.

The Phoenix Lamps Division experienced a soft quarter in both revenue and EBITDA, primarily due to the Middle East conflict impacting Trifa brand exports. While the India business remains steady, management expects softness to continue for a few quarters due to global market uncertainties. Despite this, the division secured an order from a large U.S. departmental store, and management expects double-digit margins to continue, with a potential turnaround in the second half of FY26, driven by new schemes starting August 15.

The Suprajit Electronics Division (SED) saw a decline in revenue and EBITDA, mainly attributed to a major EV customer struggling in the market. However, this was partly offset by increased requirements from the Global Controls Division and the launch of a new throttle sensor project with a top 3 three-wheeler OEM. The Suprajit Technology Center (STC) is actively developing a 2-wheeler ABS product, with its new facility housing 200 engineers on track for inauguration in 2026. Management anticipates degrowth in SED to be arrested from Q2 FY26, with improving margins and high single-digit to low double-digit growth potential.

Suprajit is undertaking significant strategic investments, including a large-scale SAP HANA implementation across 15 plants in five countries, targeted for rollout over the next 12 months. The company's capex outlook for FY26-FY27 is projected at INR 150-160 crores, spread across restructuring under SCD, the global Suprajit Technology Center, and other infrastructural projects in India. These investments are aimed at enhancing operational efficiencies, supporting global operations, and driving new technology development.

Tariffs, particularly in the U.S., remain a key discussion point, with Suprajit actively engaging with customers to mitigate the impact. The company's exposure to the U.S. market (from India, China, Canada, Europe, and Mexico) is approximately $100-110 million, with 70% being US MCA compliant. Management stated that about 30% of customers have agreed to accept increased tariffs, another 30-35% are in principle agreement, and the remaining 30-35% are still negotiating. The company believes its multiple opportunities to change its footprint offer a unique competitive position in the medium to long term.

The non-automotive business, particularly segments like lawnmowers and snow throwers, faces headwinds due to shifts in consumer buying patterns (from individual ownership to contract services) and the transition from ICE to EV. Despite these challenges, management views this as an opportunity, actively diversifying into new products like rotary sensors and throttle sensors, and expanding into electronics to mitigate the impact on traditional cable-based systems.