Emkay Global

Target: ₹2,950

CMP: ₹2,188.40

Shriram Pistons (SPRL) has entered an agreement for acquiring 100 per cent shareholding in TGPEL Precision Engineering (TGPEL), a manufacturer of high precision injection molds and components, at an EV of ₹220 crore on a debt-free, cash-free basis (expected to close by end December 24; press release).

We believe the acquisition, though small (about 4 per cent of SPRL sales), is important strategically. It will represent another step in diversifying away from engine parts (non-engine revenue contribution may rise to about 15 per cent on pro forma basis vs around 11 per cent pre-TGPEL).

It will also provide another play on a high-growth area, benefiting from the light-weighting trend, with around 4 per cent EPS accretion in FY26E (not built-in). TGPEL’s healthy profitability (about 20-23 per cent EBITDA margin, and over 20 per cent RoCE) and reasonable deal valuation (around 1.9x FY24 EV/Sales; 10.6x PER) provide comfort.

We maintain Buy with unchanged estimates; we raise TP to ₹2,950 at 20x December-26E PER (rolled over; multiple upgraded from 18x earlier, on sustained growth prospects vs the underlying Auto industry, along with rising diversification away from ICE, robust cash flows, and return ratios).