Pitti Engineering - Strengthening Market Position Through Strategic Acquisition, Growth Initiatives: DRChoksey

DRChoksey Research Report

The acquisition allows Pitti Engineering Ltd. to expand its presence in South India, increase its production capacity, enter new sectors, and gain new customers.

This move is seen as a step towards enhancing operational strength resulting in improved Ebitda margins and broadening market penetration for Pitti Engineering by achieving a 12.0-13.0% market share.

We believe the acquisition will bring in new customers, create synergies in sales and marketing, and enable Pitti Engineering to sell its existing product portfolio to these new customers, thereby enhancing market penetration and revenue streams.

We expect the revenues/ Ebitda/profit after tax to grow at a compound annual growth rate of 20.4%/ 23.8%/ 39.0%, respectively, over FY23-26E led by the healthy growth in the organic business driven by its order book and also supported by the inorganic synergies.

Pitti Engineering is currently trading at 31.2 times/21.1 times its FY24E/FY25E earnings per share.

We maintain our price/earning multiple of 22.0 times to FY26E EPS of Rs 49.2 (Rs 46.7 previously), as we like the prospects of the acquired business and the synergies that can drive the Ebitda margins on a consolidated basis.

We assign a target price of Rs 1,083 per share (Rs 1,027 per share previously), with a 50.0% upside from current levels, to reflect improved scale and the company’s plans to reduce debt. Accordingly, we maintain a Buy rating on the shares of Pitti Engineering.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.