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S J S Enterprises Ltd

| Q3 & 9M FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤3rd Feb 26

Summary : SJS Enterprises delivered record Q3 FY26 results, driven by strong automotive growth, surging exports, and new product contributions, while strategically investing in display systems and capacity expansion for sustained future growth.

Management Perspective positive : Management consistently used phrases like 'strong momentum,' 'robust growth,' 'highest ever quarterly,' 'extremely bullish,' and 'very confident' when discussing performance and future outlook. They also highlighted disciplined execution and strategic initiatives.

Concall Report Analysis & Insights

Business Overview

  1. SJS achieved its 25th consecutive quarter of outperformance in Q3 FY26.
  2. Automotive business grew 46% year-over-year, tripling industry growth.
  3. Consolidated revenue reached Rs 2,435.35 million, a 36.4% Y-o-Y increase.
  4. Recorded highest quarterly EBITDA (30.5%) and PAT (18.5%) margins since IPO.
  5. New generation products contributed over 23% to consolidated revenue.
  6. Exports surged 146.2% Y-o-Y to Rs. 283.1 million in Q3 FY26.

Future Growth Prospects

  1. Planned capital expenditure in cover glass and capacity expansion at Bangalore and Pune facilities.
  2. Evaluating selective inorganic opportunities to strengthen market presence and accelerate growth.
  3. Driving long-term growth through premium aesthetic solutions and new product development.
  4. Increasing new generation product contribution across 2-wheeler, passenger vehicle, and consumer segments.
  5. Strengthening export presence in key international markets, targeting 14-15% of revenue by FY28.
  6. Partnership with BOE Varitronix for optical bonding and automotive display systems, entering a new vertical.
  7. Future kit value for passenger vehicles expected to increase 5-8 times from legacy values.

Management Insights

  1. The company maintained strong momentum in Q3 FY26, delivering its 25th consecutive quarter of outperformance.
  2. SJS reported its highest ever quarterly revenue and profitability margins since its IPO.
  3. Strategic initiatives have translated into sustained momentum, outperforming the automotive industry.
  4. The partnership with BOE Varitronix for automotive display systems marks a foray into a rapid-growth vertical.
  5. Expanding global footprint is central to long-term strategy, targeting 14-15% export contribution by FY28.

Signs of Skepticism

  1. Management is conservative on margin guidance (28-29%) despite current 30.5% and operating leverage potential.
  2. Specific quantification of new product contribution to overall growth was not provided.
  3. Details on specific customer relationships and supply volumes are withheld due to confidentiality.

Risk Factors

  1. Forward-looking statements involve inherent risks and uncertainties.
  2. One-time impact of Rs. 18.1 million on employee benefits due to new labor codes.
  3. Initial margin pressure expected when new capex capacities come online.
  4. Global market uncertainties could impact sustained export momentum.

Good To Know

  1. Launched 'Pink Line' initiative to promote women empowerment and workplace safety.
  2. Securing 2-megawatt wind power to meet 80% of the group's energy needs from renewables.
  3. Supports education for specially-abled children and provides meals to the needy.
  4. Contributes to medical aid for the underprivileged through CBCI Society.

Key Drivers

  1. New product development and premiumization.
  2. Expanding global footprint and exports.
  3. Strategic partnership for automotive displays.
  4. Capacity expansion and operational efficiency.

Key Analyst Discussions

Competitive Environment

  1. The Indian-EU trade deal is expected to help SJS access European markets faster, strengthening its presence in Germany.
  2. Export momentum is sustainable due to new technology products, validated for global OEMs, and difficult to disrupt.
  3. SJS is winning new global businesses beyond Stellantis and Whirlpool, including Nissan, and aims for more Western European OEMs.
  4. The company is a well-recognized global supplier for quality and reliability, with natural barriers to entry in aesthetic parts.

Market Trends & Consumer Behavior

  1. The consumer business grew 7.5% quarter-over-quarter, with confidence in continued growth as volumes ramp up.
  2. The automotive display market is estimated to reach Rs. 3,000-4,000 crores by FY30, with almost 100% PVs using displays.
  3. There is a strong tailwind for larger displays and increased penetration across all vehicle segments.
  4. New high-technology products from Mahindra and Tata are finding good market acceptance, driving premiumization.

Financial Highlights

  1. Management does not disclose margins by business segment, but Walter Pack is meeting internal benchmarks.
  2. Input cost pressures are ongoing, but the company maintains resilience through operational efficiencies and waste reduction.
  3. Current operating margins are around 28-29%, and management expects to maintain this profile.
  4. The company is conservative with margin guidance, preferring to deliver what is committed rather than over-promise.

Product Composition

  1. The cover glass plant in Hosur is set up, equipment is on order, with sales expected to commence in FY28.
  2. SJS is consolidating its position with Hero MotoCorp and discussing other products beyond decals and logos.
  3. The Exotech new plant is under commissioning, with revenues expected to start flowing next year (FY27).
  4. IME products show customer interest, with traction expected to increase with battery-powered vehicle penetration.
  5. The new display project will involve manufacturing cover glass and optical bonding of display units (cover glass, TFT, backlight).

Strategic Considerations

  1. M&A is an integral part of the growth strategy, primarily for faster market access and leveraging existing product range.
  2. The company is in the evaluation phase for M&A targets, aiming to conclude a transaction within the next year.
  3. Capacity expansion projects are underway, funded by internal accruals, with significant progress at Decoplast and Bangalore.
  4. The technology tie-up with BOE was crucial for entering the new display business, providing necessary know-how and global scale.
S J S Enterprises Ltd (SJS) Concall Report Analysis & Insights | Dhanarthi