Last updated: 29 Oct, 2021 | 10:18 am
S.J.S. Enterprises Limited (SJS) IPO opens for subscription on 1st November. The company is looking to raise up to Rs 800 crore through the public issue. Here are the details:
About the IPO
S.J.S. Enterprises IPO Date: 1 November - 3 November 2021
S.J.S. Enterprises IPO Price band: Rs 531 - Rs 542
Issue Size: Rs 800 crore (Offer for sale of Equity Shares aggregating up to Rs 800 Cr)
Post Issue Implied Market Cap: Rs 1,616 – 1,650 crore
Reservation: QIB 50%, Retail - 35%, NII 15%
Bid lot: 27 shares, and in multiples of 27 shares
Objectives of the issue
The company plan to use the fundraised for the below purposes:
About SJS. Enterprises
SJS Products
Decals and body graphics - are used in two-wheelers and passenger vehicles and are applied to the body of a vehicle to enhance its appearance. The company has been manufacturing them for over 33 years.
2D appliques and dials - are used in two-wheelers and passenger vehicles as speed or revolutions-per-minute indicators in speedometer clusters. SJS has approximately 25 years of experience in manufacturing these products.
3D appliques and dials - New generation vehicles tend to use aesthetically superior 3D appliques and dials. They are the exclusive supplier of these products to top Korean passenger vehicle OEMs in India.
3D lux badges - are typically used in 2-wheelers and passenger vehicles to showcase a customer’s logo or brand. SJS has approximately 11 years of experience in manufacturing these products.
IMLs/IMDs - are used in many products, such as control panels in vehicles and consumer appliances, branding logos, and decorative plastics. The company has been manufacturing these products for the last two years.
Industry Peers
The industry peers of the company include Polyplastics Industries India, Classic Stripes, PRS Permacel, Monochem Graphics, Galva Deco Parts and Kongovi.
Financials
USP
Premium products - SJS is a leading aesthetics solution provider with an extensive suite of premium products. They have demonstrated the ability to differentiate their offerings and are well-positioned to continue to benefit from the increasing trend of premiumization across the automotive and consumer appliances industries.
Established supply chain and delivery mechanism - It has strong manufacturing capabilities supported by an established supply chain and delivery mechanism. The strength of their delivery mechanism is
demonstrated by its ability to supply products to around 175 customers in approximately 90 cities across 20 countries.
Innovative and strong product design - It has in-house design, development, and engineering capabilities that encourage innovation and improve efficiency in its manufacturing processes. They have developed capabilities to engineer products using multiple material substrates and processes, from injection molding to metal forming, with support from dedicated suppliers that adhere to their stringent quality standards.
Long-Lasting customer relationships - Company’s key customer base includes automotive OEMs, global Tier-1 automotive component suppliers, consumer durables/ appliances manufacturers, medical devices manufacturers, and sanitary ware manufacturers. Their relationship with its 10 largest customers in terms of revenue averaged approximately 15 years.
Growth Potential
Leverage market position - The future trend is to be driven by growing premiumization and a rise in the adoption of electric vehicles over the next five years. SJS plans to continue to leverage its market leadership and diverse product offerings to capitalize on EV and other trends and enhance its focus on premium products.
New technology and advanced aesthetic products - The company has started offering products that use chrome-plated, printed, and painted injection-molded plastic parts, radiator grills, and door handles. The company plans to develop and introduce IMEs and internet of things (IoT) enabled solutions that allow integration of electronic chips and circuit boards within a plastic injection molded part.
Increase geographical footprint - SJS plans to increase its presence in existing geographies and enter new geographies based on current customer relationships. There are growth opportunities in certain select international markets, particularly in Europe and North America, and the company plans to target those areas.
Risks
Dependency on key customers - The company’s top customers accounted for 21.49%, 23.99%, and 33.59% of its revenue from operations in FY21, FY20, and FY19, respectively. Any loss of key customers or significant reduction in production and sales of, or demand for its products will adversely affect its business and financial performance.
Depending on the automotive industry - SJS depends significantly on its customers in the automotive industry and consumer appliance industry, and a decline in their performance, in India or globally, could adversely affect the business and profitability of the company.
Competitive industry - Several other enterprises manufacture one or a limited range of aesthetics and are direct suppliers to OEMs and Tier-1 suppliers. SJS operates in a highly competitive industry, and increased competition may lead to a reduction in its revenues, reduced profit margins, or a loss of market share.
INDmoney Analysis
SJS Enterprises has reported a tepid 3% CAGR rise in topline between FY19 and FY21 to Rs 252 crore, impacted by the pandemic during the period. The bottomline growth has also remained subdued at a CAGR of 12% during the same period. However, the company has been able to maintain strong operating and profit margins during this period.
At the higher end of the price band, SJS Enterprises is priced at a PE ratio of ~35 times FY21 Earnings per share. There are no listed peers to compare this valuation with. Given the supply disruptions in the auto industry, SJS Enterprises could see an impact on its financial performance. However, the management is confident that the demand will rebound in the next 3-4 months.
Given factors such as tepid growth in financials over the last three years, good return ratios, stable margins, uncertain outlook due to high dependence on auto industry, and high valuations, we remain ‘Neutral’ on the prospects of the issue.