The industrial product industry, valued at approximately $2.5 trillion globally, plays a crucial role in manufacturing and infrastructure. With a projected growth rate of 5.6% annually, it encompasses machinery, tools, and equipment essential for various sectors, driving innovation and economic development worldwide.
With a market capitalization of Rs 2,811.43 crore, the shares of Pitti Engineering Ltd were trading at Rs 877.20 per share, increasing around 0.41 percent as compared to the previous closing price of Rs 873.60 apiece.
Looking into Pitti Engineering’s financial performance, revenue increased by 32 percent from Rs 247 crore in Q3 FY23 to Rs 327 crore in Q3 FY24. During the same period, net profit increased by 67 percent, from Rs 24 crore to Rs 40 crore.
ICICI Direct, one of the well-known brokerages in India, gave a ‘Buy’ call on the engineering stock with a target price of Rs 1,145 apiece, indicating a potential upside of 31 percent from Tuesday’s price of Rs 877.20 per share.
Here is the rationale behind the bullish potential upside of 31%:
● In Q4FY24, the firm reached its largest sales volume ever, with a YoY gain of around 19% in volumes and 36% in revenue. Topline increase was accompanied by considerable improvements in EBITDA and PAT margin. Railways and renewables outperformed other categories throughout the period. It reported the highest-ever (quarterly) export income of Rs 125 crore.
● The company acquired 100% of the equity share capital of Bagadia Chaitra Industries Private Limited (BCIPL), forming a wholly-owned subsidiary. The purchased business is expected to generate around 16,000 MT of volume in FY25. The current EBITDA/tonne for this firm is about Rs 10,500. However, management expects to improve margins through economies of scale and synergies beginning in Q1FY25, with the target of attaining Rs 18,000/tonne within 12-18 months.
● As of the quarter end, the order book was over Rs 800 Cr, with an estimated Rs 600 Cr to be implemented in FY25. Exports account for around 25-30% of the order book. BCIPL is scheduled to start contributing in FY25 but may harm margins initially. Management anticipates that the machine components industry will generate Rs 500-700 Cr annually over the next 3-4 years.
● PEL’s strategic evolution of value-added products has boosted profitability and competitiveness. In FY24, EBITDA/Tonne improved by 5.3% (3-year CAGR), enhancing profitability by 46%. Growing demand in renewable energy and marine applications is expected to drive future revenue and profitability.
Pitti Engineering Limited is engaged in the manufacture of engineering products of iron and steel. These products include electrical steel laminations, stator and rotor core assemblies, sub-assemblies, pole assemblies, die-cast rotors, press tools, and high-precision machining of various metal components.
Written by:- Abhishek Singh
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