Shares of Pitti Engineering have surged up over 118% since the start of the year, and analysts at Axis Securities see the stock surging further up as the company expands its global footprint.

The Pitti Engineering Analyst: Akshay Mokashe for Axis Securities initiated coverage on the stock with a “buy” rating and a target price of ₹915. The target reflects a 38% upside from the stock’s last closing price of ₹659.60.

The Pitti Engineering Thesis: Pitti Engineering Ltd, established in 1983, is one of India’s leading manufacturers in the realm of electrical sheet laminations, motor cores, sub-assemblies, die-cast rotors, and machined components.

The brokerage firm in its notes said that during the year ended March 2023, the small-cap company witnessed a noteworthy 5% improvement in EBITDA per ton (3-year CAGR), translating to a substantial 51% upswing in overall profitability (3-year CAGR). As per the note, this success can be attributed to the company’s focus on value-added products, enhancing its competitive standing and drawing an increased customer base.

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The brokerage firm also pointed out that export orders, a significant revenue stream, surged to ₹371 crore, marking a robust 25% year-on-year growth. Anticipating a surge in demand within the international renewable energy segment, the brokerage foresees export markets playing a pivotal role in propelling future revenue growth and bolstering profitability.

Mokashe also highlighted that the recent merger announcement with Pitti Castings Pvt. Ltd. (PCPL) adds another dimension to the company’s growth trajectory. The merger is expected to fortify the company’s supply chain by ensuring a consistent stream of high-quality casting products, as well as enhancing control over supply and inventory management of raw materials.

Looking ahead, the analyst expects further market dominance and sales volume expansion through potential acquisitions, with an ambitious target of increasing market share by 20%.

Price Action: Pitti Engineering’s share price was up 5.22% to trade at ₹694.05 in the early hours of trading on Monday.

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