Target: ₹1,300

CMP: ₹1,101.05

SJS has always been at the forefront to adapt to new challenges through launch of some trend setting products and also through synergistic and profitable acquisitions. We believe that the acquisitions in Exotech and WPI were strategic fit, positioning SJS for enhanced business prospects. The company has demonstrated resilience in navigating such challenges such as pandemic-related disruptions and semiconductor availability issues.

Further, we believe SJS is well-positioned for strong growth driven by sectoral tailwinds in the two-wheeler industry, bolstered by increasing vehicle content across segments due to a shift towards premiumization. SJS is actively considering opportunities for overseas acquisition.

There is no listed company directly comparable to SJS. We find that SJS is well-placed to grow largely at par on Rev/EBITDA/PAT (16/19/24 per cent) in the period between FY24-FY27E with some of the other ancillary players. While the EBITDA margin should be significantly higher compare to large peers, SJS’s return ratios are expected to be at par with them (ROE in higher teens and ROCE above 25%).

Despite expectation of robust financials, industry tailwinds and operational triggers, SJS is trading at a discount to some of its peers. We expect this gap to narrow as the company delivers on the key points and triggers explained in this report, thereby making a case for re-rating.