Detailed Narrative
Strong Q3 FY25 Performance Driven by Operational Excellence
Suprajit Engineering reported a robust Q3 FY25, with consolidated revenue (excluding SCS) growing 8% YoY to INR782 crores and operational EBITDA (excluding SCS) surging 28% YoY to INR111 crores. For the nine months ended December 31, 2024, consolidated revenue (excluding SCS) increased 8% to INR2,290 crores, and EBITDA grew 28% to INR295 crores. Standalone performance also remained strong, with 9M FY25 revenue up 14% to INR1,283 crores and EBITDA rising 13% to INR226 crores, reflecting effective internal strategies despite external challenges🌐.
Suprajit Controls Division (SCD) Achieves Double-Digit EBITDA Margins
The Suprajit Controls Division (SCD) marked a significant turnaround in Q3 FY25, achieving a double-digit EBITDA margin of 11.8% for the first time. This improvement was attributed to new contracts, better plant performance, and successful restructuring efforts across key units like SAL, U-9, SEU Hungary, Wescon, and China Lone Star. Management expressed confidence in the sustainability of these margins, expecting further improvements as newer projects come online and operational efficiencies continue to be realized.
SCS Integration and Turnaround Efforts Underway
The integration of the SCS acquisition is progressing, with management acknowledging initial challenges due to the shrinking European market and operational inefficiencies from consolidating plants into Morocco. Restructuring costs were incurred in the first two quarters, but the company expects the European operations to stabilize and improve over the next 2-3 quarters. The second tranche of the acquisition, involving profitable China and Canada operations, is expected to close in Q4 FY25 or early Q1 FY26, which should further improve overall SCS performance.
Electronics Division Navigates EV Market Volatility
The Suprajit Electronics Division (SED) experienced mixed results, with revenue growth but margins impacted by product mix changes and volatility in the Indian EV market. While SED secured new throttle projects and off-highway electronics business, the collapse of projected EV volumes from some players led to underutilization of a newly installed SMT production line. Management views this as a 'short-term' issue and expects margins to return to double digits as utilization improves and new contracts, including those for established ICE players launching EVs, ramp up.
Strategic Global Footprint and Cost Optimization
Suprajit is leveraging its strategically located Morocco plant, which has significant capacity, to address geopolitical uncertainties and tariffs, potentially supplying the US market. The company is actively in-sourcing components, such as electronic boards and motors from India for its Matamoros plant, to reduce costs and improve supply chain reliability. Operational excellence initiatives, including moving from three-shift to one-shift operations in Morocco, are driving productivity improvements and cost reductions across the group.
Indian Cable Exports and SAL Automotive Outlook
Indian cable exports recorded a 'fantastic' 35% growth, primarily driven by new business wins rather than inter-divisional shifts. Suprajit Automotive (SAL) has secured significant new contracts, with management anticipating 'even more exciting' growth in the upcoming quarters as these projects move into production. This strong domestic performance, coupled with strategic export initiatives, underpins the company's overall growth trajectory.