Buy SPR Auto Technologies; target of Rs 6150: Motilal Oswal

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • SPR Auto Technologies is transforming itself from a traditional piston manufacturer into a diversified, technology-driven, powertrain-agnostic mobility platform through strategic inorganic acquisitions.
  • The company has a strong cash cow business with market leadership in the piston segment, and is leveraging its balance sheet and cash flow profile to reinvest into acquisitions and new programs.
  • New technologies and programs, such as ABS systems for 2W and emerging technologies like Emersa, are expected to drive CPV growth of 15-18% in small cars and 30-40% in SUVs.
  • The company has a strong financial profile, with a 21% PAT CAGR expected, driven by a stable standalone business and rapid scaling of subsidiaries.

Thesis Validation Checklist

  • Demand outlook remains steady across key segments in India, with sequential improvements in margins expected on account of the passthrough of input costs to customers gradually.
  • New programs and technologies are gaining traction, with the company securing incremental business worth INR1.05b and exploring several new product opportunities.
  • The company's focus on sustainability, including a Power Purchase Agreement to source renewable power, is expected to optimize energy costs and support its sustainability objectives.
  • Investors should watch for signs of margin recovery, driven by the passthrough of input costs, and the successful execution of new programs and technologies.