Book profits in Sansera Engineering as risk-reward ratio unfavourable: Marwadi Shares

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Sansera Engineering made a decent listing on the stock exchanges on September 24. Shares of the auto ancillary unit opened for trading at Rs 811.50 on the National Stock Exchange, compared to the issue price of Rs 744, marking a premium of 9.07%. On the BSE, Sansera opened at Rs 811.35, at a premium of 9.05%.

In the afternoon session, the share was quoting a bit higher from its opening price to Rs 814. It swung between an intraday high of Rs 842 and a low of Rs 800.80, on the BSE.

Analysts view

Saurabh Joshi Research Analyst at Marwadi Shares and Finance recommends investors to book profit. The company listed at Rs.811.50/- per share with a market cap of Rs.4,169 crore implying a valuation of 38.61 times P/E whereas its peers namely Endurance Technologies and Motherson Sumi are trading at P/E of 32.74 and 33.11 times. The risk-reward ratio for holding the sock does not look favourable at this valuation and one should consider booking profits at this point in time.

“Investors can book partial profits and wait for some time. The auto sector is under pressure because of supply-side constraints. One should wait for an opportunity for a healthy correction and the price to go below the IPO price for making a fresh entry for long-term,” said Gaurav Garg, Head of Research at CapitalVia Global Research.

About Sansera

Sansera Engineering manufactures complex and critical precision engineered components and caters across automotive and non-automotive sectors. The company manufactures and supplies a wide range of precision forged and machined components and assemblies which are critical for the two-wheeler, passenger vehicle, and commercial vehicle verticals for the automotive sector. For the non-automotive sector, the company manufactures and supplies a wide range of precision components for aerospace, off-road, agriculture, and other segments. The company mostly supplies forged & machined products to OEM’s.

The company derives around 65% of its revenue from India and the rest 35% from other countries. The company is one of the major suppliers of connecting rods globally. The company has 15 manufacturing plants across India of which 9 are in Bangalore.

For the financial year ended March 31, 2021, the company reported total revenue of Rs 1,572.36 crore compared to Rs 1,640.81 crore in FY19. During the same period, despite a slowdown in top-line, its profits grew to Rs 109.86 crore versus Rs 98.06 crore in FY19.

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