The shares of this smallcap company jumped around 6 percent in Wednesday’s trading session after International brokerage Investec initiated coverage with a “buy” rating. The stock has delivered more than 100 percent on a YTD basis.
Price Movement:
With a market capitalization of Rs. 9,465 crores, the shares of Azad Engineering Ltd started Wednesday’s trading session on a lower note at Rs. 1,500 compared to its previous close of Rs. 1,507.85.
During the trading session, the shares hit a high of Rs. 1,624.90, gaining around 6 percent and are currently trading at Rs. 1,581 apiece.
What Happened:
Such a bullish movement in the share price was observed after the International brokerage Investec initiated coverage on Azad Engineering with a bullish call, believing that the aerospace components manufacturer has a strong foundation for multi-year growth.
Investec has initiated coverage on Azad Engineering with a “buy” rating, projecting a target price of Rs. 1,850 per share, which indicates a potential upside of approximately 17 percent compared to its current market price.
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Investec believes that Azad Engineering, a manufacturer of aerospace components, has a robust foundation for sustained growth over the coming years.
The firm anticipates a 40 percent compound annual growth rate (CAGR) in profit after tax (PAT) from FY24 to FY27, alongside improvements in return on invested capital (RoIC) as working capital requirements stabilize.
Furthermore, the International brokerage firm added that the aerospace component manufacturer’s business model, along with its growth prospects, is giving investors the chance to invest in multiple attractive macro themes. This also offers significant optionality for investing.
Additionally, Investec added that the firm’s stock price performance since the IPO, jumping over 100 percent since its listing in December 2023, inspires confidence.
Financials:
Looking at the company’s financial statements, the revenue increased by 5 percent from Rs. 93 crores during the March quarter to Rs. 98 crores in the June quarter. In addition, the net profits jumped by 13 percent from Rs. 15 crores to Rs. 17 crores during the same period.
Order Book:
As per reports, Azad’s order book grew to Rs 3,000 crores (book-to-bill ratio of 8.8x TTM) by the end of March FY24. In addition to recent orders from Rolls Royce, Baker Hughes, and GE Tenova, the company has also secured a contract for the complete production of Advanced Turbo Gas Generator (ATGG) engines from GTRE.
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Future Outlook:
As per reports, the company has set a revenue growth target of 25-30 percent for FY 2025, supported by strategic partnerships, including a long-term agreement with Rolls-Royce to manufacture critical components for their defence aircraft engines.
Moreover, the company is investing approximately Rs. 100 crores from its recent IPO proceeds to build a dedicated plant for Rolls-Royce components, enhancing its production capacity and operational capabilities.
And an additional Rs. 200 crores are earmarked for creating capacity to align with the company’s growth projections.
Furthermore, the company anticipates strong growth in its oil and gas segment and expects to demonstrate substantial growth in the upcoming financial year, leveraging its recent contracts and customer additions.
Important Financial Ratios:
In terms of key financial metrics, the company reported a Return on Equity (RoE) of 9.08 percent and a return on capital employed (RoCE) of 18.32 percent for the period spanning FY23-24. Further, the net profit margin during FY23-24 was 17.19 percent.
Company Profile:
Incorporated in 1983, Azad Engineering Limited is a manufacturer of aerospace components and turbines and supplies its products to original equipment manufacturers (OEMs) in the aerospace, defence, energy, and oil and gas industries.
Written By Vaibhav Patil
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