Sansera Engineering: ICICI Securities ups target price to Rs 1,500 from Rs 1,330

ICICI Securities has reaffirmed its positive outlook on Sansera Engineering, maintaining an 'ADD' rating for the company. The firm anticipates a sustained mid-teen growth trajectory, attributing this to a potential recovery in Sansera's international business operations. The company's focus on expanding its global reach is a critical component of its growth strategy.

Sansera Engineering's EBITDAM for the fourth quarter of FY25 was reported at 16.3%, falling short of ICICI Securities' expectations by 120 basis points. This shortfall in earnings before interest, taxes, depreciation, amortisation, and margin (EBITDAM) reflects some challenges, yet the company's overall financial health remains robust.

The company's orderbook is a significant highlight, valued at Rs 1,850 crore, with approximately half comprising orders from tech-agnostic, electric vehicles (EV), and non-auto segments. This diversification is anticipated to contribute to a rise in contributions from these segments to around 36% in the medium term, up from approximately 26% in FY25.

Looking ahead, Sansera Engineering expects a recovery in export activities, augmented by increased premiumisation in two-wheelers and an expanding scale in aluminium forging. The Aerospace, Defence, and Semiconductor (ADS) segment is showing strong traction, particularly in aerospace, and is projected to drive the company's double-digit growth.

ICICI Securities projects a 60 basis points expansion in Sansera’s margin over FY26-27E, driven by an improved operational mix and higher operating leverage. This improvement is expected despite the challenges faced in the previous quarter, reinforcing the firm's confidence in Sansera's strategic direction.

Despite the underperformance in Q4FY25 results, with consolidated revenue standing at Rs 780 crore—a 5% year-on-year increase—the company's new business orderbook remains healthy. Notably, 60% of this orderbook comprises international customers, which is pivotal for future growth.

ICICI Securities remains optimistic about Sansera's prospects, maintaining a target price of Rs 1,500, an increase from the earlier target of Rs 1,330. This valuation is based on 25 times the FY27E earnings per share (EPS), reflecting a strong belief in the company's capacity to navigate current market conditions.

Overall, Sansera Engineering's strategy for growth through diversification and focus on high-margin segments positions it favourably for tackling export-related challenges and capitalising on its robust orderbook in the coming years.