45% upside? This multibagger smallcap stock offers huge upside, says Elara

Elara Securities has issued a 'Buy' recommendation for smallcap S J S Enterprises Ltd, projecting a 45 per cent upside potential with a target price of Rs 1,710. The brokerage highlights the company's strategic acquisitions and robust market positioning as key factors driving growth. SJS Enterprises, known for manufacturing aesthetic components, is expected to outperform industry averages in terms of revenue and profit growth over the next few years.

The multibagger stock is up 120 per cent in the past two years and 144.23 per cent in the past three years.

Elara Securities values SJS at a premium multiple of 30 times its one-year forward EPS, echoing its differentiated aesthetics and industry-leading return ratios. The company's FY28 expected return on equity (ROE) and return on capital employed (ROCE) are 19.4 per cent and 23.5 per cent, respectively. Despite its robust earnings visibility, SJS trades at a discount to premium peers, presenting a significant re-rating opportunity as it capitalises on integration gains and export scale-up.

Elara said SJS Enterprises is positioned to achieve revenue and profit after tax (PAT) compound annual growth rates (CAGRs) of 17.5 per cent and 20.1 per cent, respectively, from FY25 to FY28. This growth is expected to be driven by increasing kit value and richer content, enabling SJS to expand faster than the industry. Exports are forecasted to rise at a CAGR of 32.8 per cent, with the export share climbing from 7.5 per cent in FY25 to approximately 13 per cent by FY28.

SJS is set to invest Rs 160 crore in capital expenditure (capex) by FY26, focusing on expanding its capacity in chrome, decal, and optical interfaces. This expansion aims to capture the demand for richer content and export opportunities, supported by the export readiness of its acquisition, Walter Pack India. The company's projected free cash flow generation of Rs 450 crore from FY25 to FY28 will partly finance this capex.

The company's revenue mix is shifting significantly, with a notable decrease in exposure to two-wheelers and an increase in passenger vehicles and consumer durables. This shift is expected to enhance average selling prices (ASPs), export exposure, and resilience to market cycles. By FY28, the revenue composition is anticipated to be 33 per cent from two-wheelers, 37 per cent from passenger vehicles, and 25 per cent from consumer durables.

SJS Enterprises' strategy of capability expansion through high-synergy acquisitions like Exotech and Walter Pack India has transformed it into a multi-tech aesthetics platform, contributing significantly to revenues. These acquisitions have enabled backward integration into chrome and advanced manufacturing capabilities, positioning SJS to scale its operations in high-value, export-ready verticals.

The company maintains a strong EBITDA margin of 25-27 per cent, among the best within auto ancillaries, driven by its premium mix and disciplined execution. It plans to fund its capex through internal accruals and holds a net cash position of approximately INR 1 billion, reflecting its capital-efficient model and strong free cash flow.

However, the brokerage notes the risks associated with a concentrated customer base and potential challenges in scaling exports and integrating acquisitions. Nevertheless, SJS's strategic direction and market opportunities offer a promising outlook for investors.