Pittie Engineering Stock Research Report by Deven Choksey Research
Analysis dated 28 September 2024
Sector: Engineering
Price on Analysis date: Rs. 1144
Target Rs. 1379
(20.50% upside potential)
Target Period: 12 Months
Pitti Engineering specializes in producing value-added motor/generator sub-assemblies and
precision machined components for various sectors. It serves clients across industries including
Automotive, Rail, windmills, and others. The Company focuses on delivering high-quality
products through advanced manufacturing techniques. Their expertise extends to custom
engineering solutions, including design and development.
Boosting profits through volume expansion and higher realization
In Q4FY24, the Company’s revenue rose to INR 3,279 Mn, up 32.5% YoY (+11.7% QoQ), driven by a
higher capacity of 56,000 MT (vs 50,200 MT) and improved capacity utilization of 79.0% (vs 74.1% YoY).
For Q4FY24, blended sales realization stood at INR 2,86,737/MT (+11.1% YoY). EBITDA increased to
INR 486 Mn, up 19.9% YoY (+10.3%), with an EBITDA margin of 14.8% (-155bps YoY/ -18bps QoQ).
PAT for Q4FY24 stood at 169 Mn, down 31.9% YoY (+27.0% QoQ).
Higher capacity additions and utilization to drive profits
Towards the end of FY24, the Company announced the acquisition of Bagadia Chaitra Industries Private
Ltd (BCIPL) at an enterprise value of INR 1249.2 Mn. BCIPL, based in Tumkur, Karnataka, produces
electrical laminations and aluminum die-cast rotors for various industries, including motors and home
appliances, with an annual capacity of 18,000 MTPA. The acquisition allows PEL to expand its presence
in South India, enhance its asset base and production capacity, enter new sectors, and attract new
customers.
Another acquisition, PITTIENG announced the acquisition of Dakshin Foundry Private Limited (DFPL) for
INR 1,531.2 million, covering its business value and working capital. DFPL, which specializes in high
quality castings and value-added services like pattern making and machining, will complement Pitti
Engineering’s existing operations. This acquisition will boost production capacity and support the
company’s inorganic growth strategy.
Pitti Engineering Ltd raised INR 3,600.0 Mn at a floor price of INR 1,054.25. The proceeds would be used
to repay certain borrowings and for general corporate purposes.
The two acquisitions will significantly boost PITTIENG’s capacity, aiming for an 80% utilization rate by
FY27E. Increased capacity, along with enhanced utilization, improved profitability, and reduced debt, is
expected to drive stronger financial performance in the upcoming quarters.
Outlook and Valuation
We expect Revenue/ EBITDA/ PAT to grow at a CAGR of 26.8%/ 29.7%/ 42.9% over FY24-FY26E. We
assign a P/E multiple of 24.0x on FY26E EPS of INR 57.5 to arrive at a target price of INR 1,379 per
share. This implies a leftover upside of 20.5% from current levels. Accordingly, we have a BUY
rating on the shares of Pitti Engineering Ltd since 26th July 2024
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