Why Analysts See This Small Cap Stock Surging 40% In 12 Months

Shares of SJS Enterprises have been under pressure in the past few months. In the last six months, the stock has gone down around 6%. However, analysts at Nuvama are hopeful of a turnaround as the company’s December quarter results beat its estimates.

The SJS Enterprises Analyst: Piyush Parag for Nuvama maintained the “buy” rating for the stock with a target price of ₹838. The target indicates an around 40% upside from the stock’s current market price of around ₹595.

The SJS Enterprises Thesis: SJS works in the Indian decorative aesthetics industry, offering comprehensive solutions from design to delivery. The brokerage said that in the December quarter, the company witnessed robust sales growth, driven by the acquisition of Walter Pack India (WPI), leading to a substantial 51% year-on-year increase in consolidated revenue. The two-wheeler/passenger vehicle segments saw impressive growth rates of 21.6% and 56.7% year-on-year, respectively, the analysts pointed out.

As per the analysts, the domestic market emerged as a key driver of growth, with a remarkable 51.9% year-on-year increase in sales. This growth was fueled by strong performances in the auto and consumer business segments, with expansions of 54.4% and 217.4%, respectively.

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In terms of profitability, SJS witnessed a significant improvement in EBITDA margin, which surged by 300 basis points quarter-on-quarter to 25.1%. This recovery was primarily attributed by the analysts to margin improvements in the WPI division, with gross margin also showing a notable increase of 390 basis points quarter-on-quarter to 55.8%. The EBITDA and PAT grew impressively by 54% and 31.9% year-on-year, and by 12% and 8% quarter-on-quarter, respectively.

Looking ahead, the brokerage highlighted that SJS aims to diversify its product portfolio by launching optical cover glass and collaborating with OEMs to introduce premium products like IML wheel caps. The management remains optimistic about its growth prospects, reaffirming its FY24 revenue and PAT growth guidance of 45% and 30%, respectively. While no specific guidance was provided for FY25 and FY26, the company expects to outperform the industry by 1.5-2x, driven by acquisitions, cross-selling opportunities, and an anticipated increase in content per vehicle.

The acquisition of WPI is expected to unlock long-term growth opportunities, enhance cross-selling synergies, and expand the customer base across various business segments.

Price Action: SJS Enterprises share price was down 3.26% to trade at ₹593.60 in early trade on Tuesday.

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Posted In: Analyst ColorEquitiesPrice TargetReiterationMarketsAnalyst RatingsNuvamaSJS Enterprises