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Axis Securities Report
We initiate coverage on Pitti Engineering Ltd. with a 'Buy' recommendation. Our recommendation is supported by-
The company's increasing capacity,
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Its increasing share of value-added products, and
Its expanding global footprints.
We expect Pitti Engineering's revenue to grow at a compound annual growth rate of 13% to Rs 1,588 crore by FY26 (factoring similar raw material price trend as of H1 FY24 backed by volume CAGR of 16% by FY26E).
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On the operational front, its Ebitda is expected to grow at 13% CAGR to Rs 258 crore by FY26E, led by an increase in value-added products, resulting in operating margin expansion (by 240 basis points to 16.2% by FY26).
We believe these factors will cumulatively boost the company's profitability at a CAGR of 38% by FY26E to Rs 154 crore.
A combined strategic operation will further support in improving the company's return on equity and return on capital employed to 25.8% and 26.7% respectively by FY26E.
We thus value Pitti Engineering at 19 times on FY26 earnings to arrive at a target price of Rs 915/share, implying an upside of 40% from the current levels.
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