Suprajit Engineering Q1 FY27 earnings call

Suprajit Engineering Limited reported its highest-ever quarterly operating revenue of ₹1,070 crores for Q1 FY27, marking a 24% year-on-year growth compared to ₹863 crores in the previous year. Consolidated operational EBITDA saw a significant increase of 57% to ₹129 crores, up from ₹82 crores in Q1 FY26. This strong performance was achieved despite a challenging global environment characterized by conflicts, commodity price volatility, and trade restrictions. The company maintains its full-year guidance for double-digit consolidated revenue growth and an EBITDA margin of 12-13.5%.

The Global Cables and Mechatronics (GCM) division, following its restructuring, delivered a robust performance with revenue growth of 27-28% and a notable improvement in EBITDA margin from 5.8% to 12.6%. The Sensors, Electronics, Displays (SED) division was a standout performer, with revenue surging 48% and EBITDA increasing by 100%, driven by new projects in digital clusters and electronic throttle grip. In contrast, the India Cables and Mechatronics (ICM) segment grew 21% in revenue but saw a 0.3% degrowth in standalone EBITDA, with margins compressing from 15% to 13%. Phoenix Lighting and Electricals (PLE) revenue grew 5.4%, but EBITDA declined 45%, with margins falling to 6.7%.

The margin compression in ICM and PLE was primarily attributed to sky-high raw material prices and increased employee costs, particularly wage inflation in the northern region. Management indicated that while mechanisms exist to pass on material cost increases, wage inflation has been a more challenging aspect. Discussions with customers are ongoing for wage pass-through, with some already agreeing. The company expects to recover most of the lost 100 basis points in margins for ICM by Q2/Q3 FY27 through a combination of price adjustments and internal cost reduction initiatives. Similarly, PLE anticipates a recovery in Q2/Q3 FY27 as new prices come into effect.

Suprajit secured significant new order wins, including a lifetime EV cable contract valued at USD 37 million (annualized USD 5 million), a European luxury OEM contract worth USD 12 million lifetime (annualized USD 2 million), and a Japanese OEM contract for USD 6 million lifetime (annualized USD 1.2 million). These wins, particularly in the EV space and across India, Mexico, and China, are driving strong volume growth. The SED division's growth is fueled by new projects ramping up in digital clusters and electronic throttle grip, with a strong pipeline of future wins. The company is also expanding its Electronics division capacity to meet increased demand.

The company is actively involved with EV customers, adopting an 'agnostic products' strategy that supports both EV and non-EV programs. Their focus is on critical components like braking systems, where requirements are changing with EV adoption. Suprajit supplies to all new-age EV brands in India for various products, including clusters, actuators, and cables. The content per vehicle for 2-wheelers is increasing, with product lines like CBS (Cable Braking System) offering significantly higher realization per unit (INR 400-1500) compared to traditional cables (INR 100), and digital clusters (INR 700-7000) replacing speedometer cables.

Suprajit's STC (Suprajit Technology Centre) continues to support R&D for projects like ABS and sunroof cables. The company jointly received the Ather's Most Innovative Supplier Award, highlighting its technological capabilities. The new STC building is on track for completion in Q3. The Electronics division is planning to relocate to a larger, rebuilt facility to accommodate higher traction. The US non-auto business is expected to become significantly larger next year, with the number of stores potentially tripling or quadrupling. The Chinese OEM business, currently showing 20% growth, is also expected to continue its upward trend with new projects launching over the next 12 months.