Suprajit Engineering

Company Background

Beginning in 1987 as a small-scale automotive cables manufacturer, Suprajit Engineering is today the largest automotive cables manufacturer in India with an annual capacity of over 75 million cables reported in FY10. It dominates the 2 wheeler segment with over 60% market share, has a decent presence in the 4-wheeler segment, and is now making forays into non-automotive cables sectors.

The main product lines are Control Cables (brake & clutch), Speedometer cables, and Speedometer instruments. Major customers are TVS, Bajaj, Hero Honda, M&M, General Motors, Suzuki, Piaggio, Tata group. Manufacturing is spread over 10 strategically located (close to major customers) plants - Manesar (Haryana), Chakan (Maharashtra), Vapi (Gujarat), Pantnagar (Uttaranchal), Haridwar, Sanand, Dodaballapur, Bangalore, and a facility for manufacturing high-end specialty automotive cables at Gill Cables, a wholly owned subsidiary, United Kingdom.

Exports Sales are roughly at around 25%.

Growth Snapshot

We can't just look at a series of past growth rates and assume that they will predict the future - if investing were that easy, money managers would be paid much less, and this stock analysis would be much shorter. It’s critical to investigate the Sources of a company's growth.

Variable	FY06	FY07	FY08	FY09	FY10
Sales Turnover (Rs. Cr.)	135.45	150.30	158.30	183.38	225.45
Sales Growth Year on Year		10.12	6.21	18.74	27.73
3yr Average Sales Growth				11.69	17.56
3yr Sales CAGR			8.15	12.30	23.15
5yr Average Sales growth					15.70
5yr Sales CAGR					15.41
Profit After Tax (PAT) (Rs. Cr.)	12.80	12.48	4.88	11.63	21.81
Adjusted EPS	1.07	1.04	0.41	0.97	1.82
EPS Growth Year on Year		-2.50	-60.90	138.32	87.53
3yr Average EPS growth				24.97	54.98
3yr EPS CAGR			-38.25	-3.47	111.41
5yr Average EPS growth					40.61
5yr EPS CAGR					14.25

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Profitability Snapshot

Profitability is the second, and in many ways, the most crucial, part of our Analysis framework. How much profit is the company generating relative to the amount of money invested in the business - the returns? This is the real key to separating a great company from average ones -the higher that return, the more attractive that business. Net profit Margins and comparing cash flow from operations to reported earnings per share are good ways to get a rough idea of the company's profitability (because cash flow from Operations represents real profits!). But neither account for the amount of capital that's tied up in the business, and that's something we cant ignore. We need to know how much economic profit the company is able to generate per dollar/rupee of capital employed because it will have more excess profits to re-invest which will give it an advantage over less-efficient competitors.

Variable	FY06	FY07	FY08	FY09	FY10
Operating Profit Margin	17.51	16.37	12.50	15.99	19.56
Net Profit Margin	10.87	9.63	3.54	7.11	10.44
Fixed Asset Turnover	4.51	4.61	2.91	3.05	3.72
Asset Turnover	1.72	1.23	1.20	1.53	1.68
Return on Assets	18.74	11.82	4.25	10.86	17.58
Financial Leverage	1.73	2.18	2.34	1.86	1.69
Return on Equity	32.39	25.72	9.96	20.18	29.68
Return on Capital Employed	29.71	20.36	12.69	22.36	30.46
Debtor Days	96.26	82.14	93.93	72.97	75.20
Inventory Days	38.93	44.75	38.17	37.24	41.76
Cash from Operating Activities (Rs. Cr.)
Operating Cash Flow to Sales
Capital Expenditure		18.39	13.45	6.85	8.56
Free Cash Flow
Free Cash Flow to Sales
Equity Dividend (Rs. Cr.)	3.00	3.00	2.40	2.70	5.10
Dividend per share	0.50	0.50	0.40	0.45	0.42
Adjusted DPS	0.25	0.25	0.20	0.23	0.42
Dividend Growth Year on Year		0.00	-20.00	12.50	88.89
3yr DPS CAGR			-10.56	-5.13	45.77
5yr DPS CAGR					14.19
Dividend Payout	23.44	24.04	49.18	23.22	23.38

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Common size P&L Statement

Can we dig deeper to see what else we can understand about how this company makes money? A good way is to look at the common size profit and loss statement. Common size statements are great tools for evaluating companies because they put every line item in context by looking at each of them as a percentage of Sales.

Variable	FY06	FY07	FY08	FY09	FY10
Common Size Sales	100.00	100.00	100.00	100.00	100.00
Common Size Raw Material	66.58	67.17	70.61	67.06	62.93
Common Size Power & Fuel	1.87	1.88	1.95	1.69	1.69
Common Size Employee Cost	7.26	9.56	9.92	9.57	10.28
Common Size COGS	70.32	70.08	72.91	69.48	65.41
Gross Profit Margin	29.68	29.92	27.09	30.52	34.59
Common Size Depreciation	2.34	2.22	2.72	2.61	2.15
Common Size Interest Cost	1.28	2.50	3.21	3.58	2.75
Common Size SG&A	12.23	14.11	14.62	15.20	14.46
Operating Profit Margin	17.51	16.37	12.50	15.99	19.56

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Financial Health Snapshot

Once we have figured out how fast (and why) a company has grown and how profitable it is, we need to look at its financial health. Even the most beautiful home needs a solid foundation, after all.

Variable	FY06	FY07	FY08	FY09	FY10
Financial Leverage	1.73	2.18	2.34	1.86	1.69
Debt to Assets	0.42	0.54	0.57	0.46	0.41
Debt to Equity	0.73	1.18	1.34	0.86	0.69
Interest Coverage	13.44	6.64	3.30	4.09	6.59
Interest Cost to Total Debt	5.25	5.68	6.72	11.84	11.34
Current Ratio	7.00	4.40	3.77	2.45	2.62
Quick Ratio	6.11	3.71	3.19	1.95	2.00
Cash to Assets	8.05	1.85	1.22	0.84	0.84

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Suprajit Engineering

Company Background

Growth Snapshot

Profitability Snapshot

Common size P&L Statement

Financial Health Snapshot

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