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IDBI Capital Report
Harsha Engineers International Ltd. delivered results below our expectations. Although revenue came in line with estimates, profitability metrics were below expectations.
Revenue declined by 13% YoY albeit from a strong base. Ebitda margins also came in lower than estimates owing to lower gross margin of 44.8% as against usual run-rate of 47-48%.
Gross margin drop was on account of higher sales of semi-finished castings and inventory led currency conversion loss of Rs 24.2 million on consolidation.
Although Harsha Engineers is seeing good demand traction domestically, headwinds persist in the subsidiaries performance with difficult market conditions in Europe and China.
Performance of Romanian and Chinese subsidiaries is expected to pick up in H2 FY24. We maintain our 'Hold' rating with target price of Rs 469 at 22 times FY25E expected earnings.
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