LKP Research Recommends SJS Enterprises: Target Price of ₹1,300 Offers 28% Upside

LKP Research is optimistic about SJS Enterprises, recommending a “Buy” rating with a target price of ₹1,300 in their report dated October 16, 2024. This suggests a potential upside of 28%.

Growth Factors

LKP believes SJS will grow faster than the industry due to several factors:

• Premiumization Trend: The company is shifting to higher-value products, such as:
  • 3D Dials: 2x higher sales prices
  • Capacitive Overlays: 2x higher sales prices
  • Premium Logos: 20% higher sales prices
  • IML/IMD Products: 1.5x higher sales prices
• New Customers: SJS is adding new clients.
• Cross-Selling Opportunities: The company is maximizing sales to existing customers.

Strong Operational Performance

SJS has shown excellent operational abilities, particularly in doubling Exotech’s revenues and improving profit margins since acquiring it. The company maintains a strong cash balance and generates healthy free cash flow, which is expected to support solid future growth.

Technological Edge

SJS stands out with over 7,000 different products across 13-14 categories, making it a preferred partner for original equipment manufacturers (OEMs). It has built strong relationships with its top customers, averaging 19 years of collaboration. SJS offers quick design-to-delivery solutions, ranging from 15 days to 6 months. The recent acquisition of WPI has strengthened its technological capabilities, adding advanced production methods.

Focus on Premiumization

SJS has been consistently growing faster than the industry by diversifying its product range and focusing on premium offerings. The shift towards premium products has significantly increased the share of new-generation items from 3% to 25% in the past five years, with further growth expected.

Cross-Selling and Export Growth

SJS’s strong customer relationships are key to successful cross-selling, highlighted by Exotech securing its first export order from Whirlpool. The company is also focusing on appointing agents abroad and is receiving new orders from global customers like Whirlpool, Visteon, Continental, Marelli, and Stellantis, indicating a bright future for exports.