Suprajit Engineering stuns with double-digit growth amid global market slump—What’s their secret?

Suprajit Engineering Limited, a leading Indian automotive component manufacturer, has reported significant growth for the first half of the fiscal year 2024, despite the challenging market landscape. The company’s revenue and EBITDA have both shown notable increases across several divisions, with its standalone business outpacing expectations. Suprajit Engineering’s management highlighted the strength of its core divisions and new contract wins as factors behind its solid performance. However, restructuring costs and acquisitions have presented ongoing challenges, especially in Europe.

Financial Overview: Revenue & EBITDA Surge Across Key Divisions

In the half-year ending September 2024, Suprajit Engineering recorded consolidated operating revenue (excluding SCS) of ₹15,082.88 million, an increase of 8.62% from the previous year’s figure of ₹13,885.57 million. Consolidated EBITDA reached ₹1,839.82 million, representing a 27.62% growth over the corresponding period last year. On a standalone basis, the company posted a revenue increase of 15.06%, while EBITDA grew by 15.70%, signaling strong financial resilience in a turbulent market.

Sectoral Highlights: Suprajit Controls and Electronics Drive Growth

The Suprajit Controls Division (SCD) continued its strong performance, with EBITDA growth hitting an impressive 147% in Q2 2024. Management attributed this to improved operational efficiencies and consolidation efforts, allowing the division to mitigate rising costs while capturing new automotive and non-automotive contracts. A strategic focus on North America and Europe, coupled with ongoing restructuring initiatives, positioned SCD for sustainable growth despite geopolitical challenges in European markets.

The Suprajit Electronics Division (SED) also showed remarkable results, posting revenue growth of 79.32% for the half-year. The division’s EBITDA saw an extraordinary increase, highlighting the division’s critical role in meeting growing demands for electronic and mechanical speedometers. This progress is further buoyed by a new export contract from a major global automotive manufacturer, marking SED’s international expansion.

Europe’s SCS Acquisition: Mixed Results with Short-Term Losses

Suprajit’s recent acquisition of Stahlschmidt Cable Systems (SCS) has presented challenges as the company navigates restructuring costs and market slowdown in Europe. SCS, which was acquired in a bid to expand Suprajit’s presence in Germany, Poland, and Morocco, contributed an operating revenue of ₹601.65 million but reported an EBITDA loss of ₹101 million. CFO Medappa Gowda indicated that these results reflect transitional restructuring expenses, including the closure of SCS’s Polish plant and cost optimization measures in Germany.

The company’s restructuring strategy for SCS is focused on streamlining operations by relocating the German warehouse to Hungary and scaling up operations in Morocco. Gowda conveyed confidence that these efforts will yield positive results within a few quarters, ultimately aligning the SCS operations with Suprajit’s profitability goals.

Domestic Cable and Phoenix Lamps Divisions: Steady Growth

Domestically, Suprajit’s Cable Division (DCD) posted a revenue increase of 13.84% with a steady EBITDA margin of 16.53%, reinforcing its strong position in the Indian market. Meanwhile, the Phoenix Lamps Division (PLD) recorded a 2.46% revenue growth and a 55.24% increase in EBITDA for the half-year, driven by strong performance in the Indian aftermarket sector and robust demand for lighting products.

Expert Insight: Industry Analyst Praises Suprajit’s Strategic Acquisitions

Industry analysts have highlighted Suprajit’s forward-looking strategy of diversification and acquisitions as key to its continued success. One analyst noted that Suprajit’s integration of SCS, though initially costly, reflects a long-term vision to enhance its global supply chain capabilities, especially within the challenging European market. The expert further emphasized that Suprajit’s increased focus on high-demand segments, like electronics and automotive cables, positions it well for future growth.

Future Prospects: Investments in Tech Centres and Facility Expansion

Looking forward, Suprajit remains committed to innovation and growth. The Suprajit Technology Centre (STC) continues to spearhead product development across the group, with a new fully owned facility inaugurated in October 2024. Management has also strengthened corporate and support teams, signaling readiness for expanded operations and continued growth. With the acquisition’s second tranche, involving facilities in China and Canada, expected to complete in Q4, Suprajit’s transformation plan is well underway.

Suprajit Engineering’s H1 2024 results underscore its resilience and adaptability in a complex market environment. While restructuring costs and acquisition-related expenses remain challenging, the company’s diversified portfolio and strategic focus on efficiency position it for continued growth.