About the company:
SJS Enterprises IPO Note
Issue Details:
Dates: 1st November
2021 to 3rd November 2021
Price Band: Rs. 531 to Rs. 542
per share
Minimum Lot: 27 shares
Minimum Application Amount:
Rs. 14,337- Rs. 14,634
Total Issue Size: Rs. 800
Crore (100% Offer for Sale)
Company Profile & Business Prospects
Incorporated in June
1987, S.J.S Enterprises Ltd has established itself as one of the leading players
in the Indian decorative aesthetics industry in terms of revenues as of FY20.
Aesthetics refers to design, decals, logos and instrument clusters for two and
four wheelers, SJS also designs logos and decals for consumer durables
industry.
It is a “design-to-delivery”
aesthetics solutions provider with the ability to design, develop and
manufacture a diverse product portfolio for a wide range of customers primarily
in the automotive and consumer appliance industries. The company supplied over
115 million parts with more than 6,000 SKUs in Fiscal 2021 to around 170
customers in approximately 90 cities across 20 countries.
In addition to producing aesthetic items for 2-Wheelers, PVs, and consumer appliances, it also produces
a wide range of aesthetic products for commercial vehicles, medical devices,
farm equipment, and sanitary ware. Decals and body graphics, 2D and 3D
appliques and dials, 3D lux badges, domes, overlays, aluminium badges,
“In-mould” label or decoration components (“IML/IMD(s)”), lens mask assembly,
and chrome-plated printed and painted injection moulded plastic parts are
among the company's products. Under the “Transform" brand, the company
also produces a variety of accessories for the aftermarket of two-wheelers and
passenger vehicles.
Decent Financials:
For FY19-21, SJS has grown revenues and earnings at a moderate CAGR of
3% and 13%, respectively. As of FY21, it had higher PAT and EBITDA margins of
19% and 32%, respectively, than its peers, which varied from 2 to 25%.
Furthermore, as of FY21, SJS had an ROE and ROCE of 17% and 23%, respectively,
which is again superior as compared to its unlisted peers in the aesthetics
industry. Overall, the financials appear to be good when compared to its
unlisted competitors, but the present slowdown in the auto industry is
anticipated to have an influence on the company's margins in the coming years.
Key Risks:
· High reliance on the
Indian automotive sector (75 per cent of sales) - Any drop in performance of
SJS's key customers in the auto and consumer durables space will have a severe
impact on revenues. Apart from that, the cyclical and seasonal nature of car
sales may have a negative impact on the company's operations.
· High client
concentration — as of FY21, the company's top five customers accounted for 63%
of total revenue from operations; losing any of these customers would result in
a large drop in revenue.
Conclusion:
Leading OEM players like Suzuki,
Mahindra & Mahindra, Volkswagen, Ashok Leyland, and consumer durable
company’s like Whirlpool, Panasonic, and others are among SJS’s long standing
customers. Nearly 75% of its revenues come from the automotive business as of
June 30, 2021, with the balance coming from the consumer durables market. This
means that SJS's revenue growth is inextricably linked to the automobile
industry; any slowdown or downturn in the auto sector will have a severe impact
on SJS's sales. Due to a semi-conductor scarcity in the auto sector, the
company's capacity utilisation stood as low as 13% as of June 30, 2021, and 44%
in FY21. Further, the promoters are attempting to sell a whopping 49% of their
holding in the IPO via a 100% offer for sale, implying that they may be looking
to cash in on the IPO bull run. As a result, we advise investors to ‘AVOID' this IPO for the time being considering
that there are better investment opportunities available in the primary market.
Easy & quick