BUY

Initiating Coverage Pitti Engineering Ltd Target Price

1st December, 2023 Capital Goods 915

IMPROVING PROFITABILITY ONE MOTOR AT A TIME!

CMP as of 30th November, 2023
Pitti Engineering Ltd. (PITTIENG), founded in 1983, is India’s largest and globally
renowned manufacturer of electrical sheet laminations, motor cores, sub-assemblies, CMP (Rs) 653
die-cast rotors, and machined components. The company specializes in manufacturing Upside /Downside (%) 40
value-added motor/generator sub-assemblies with an expertise of ~40 years in the
domain. The company’s key product lines include sheet metal, precision machining, and High/Low (Rs) 736/257
assemblies. The company’s products are sold across 5 continents through its 3 Market cap ( Cr) 2.087
domestic state-of-the-art manufacturing plants.
Avg. daily vol. (6m) Shrs. 90.414
Value-added products to yield higher realizations
No. of shares ( Cr) 3.2
PEL has strategically evolved its products to meet market demands, resulting in the company's
profitability improvement. These value-added products have also helped the company to Shareholding (%)
enhance its competitive edge and attract more customers. In FY23, PEL’s EBITDA/Ton
improved by 5% (3-year CAGR), thereby improving its profitability further by 51% (3-year Mar-23 Jun-22 Sept-23
CAGR). These value-added products have also helped the company to enhance its competitive Promoter Group 59.3 59.3 59.3
edge and attract more customers. Revenue from export orders stood at Rs 371 Cr which
FII 0.0 0.2 0.1
improved by 25% YoY. Similarly, with increasing demand in the renewable energy segment in
the international market, we believe the export market will significantly aid in PEL’s revenue MF’s/Banks 3.1 3.0 2.4
growth and improve its profitability moving forward. Others 37.6 37.5 38.2
Capex-driven economy to support robust order book
In FY23, PITTI’s order book significantly improved by 149% YoY to Rs 823 Cr backed by a) a Financial & Valuations
diversified product basket, and b) robust demand from the domestic market on account of Y/E Dec (Rs FY23 FY24E FY25E FY26E
economic growth and increasing enquiries from the international market. We expect the Cr)
Net Sales 1,100 1,201 1,351 1,588
company’s order book to further improve given the increasing growth and demand from the
EBITDA 151 184 212 258
Railways, Power Generation, and Industrial sectors for the company’s products. To cater to this
demand, PEL has already carried a major Capex of Rs 467 Cr in a phased manner from FY21. Net Profit 59 93 112 154
This has increased PEL’s production capacity by ~56% in the last 3 years. Earlier, PEL used to EPS (Rs) 18.4 29.1 35.1 48.0
supply products to 100 windmills a year whereas, with increasing demand in the renewable PER (x) 37 23 19 14
energy segment, PEL is currently supplying its products to 100 windmills per month. This EV/ EBITDA 15 14 11 9
supply is expected to further increase as many players have made India a hub for sourcing for (x)
its South Asian country's needs. P/BV (x) 6 5 4 3

Pitti Casting (PCPL) Merger and potential acquisition ROE (%) 19.0 24.8 23.9 25.8

PEL recently announced the merger of Pitti Castings Pvt. Ltd. – a group company engaged in Key Drivers (%) (Growth in %)
the manufacturing of high-quality casting in grey iron, ductile iron, low carbon, and alloy steel
grades. Post-merger, PCL’s revenue is expected to grow significantly on account of robust Y/E Mar FY23 FY24E FY25E FY26E
demand in the components business, leading to higher operating margins for the company. In Net Sales 15.3 9.2 12.4 17.6
FY23, PCPlL’s revenue stood at Rs 150 Cr, in which PEL contributed Rs 80 Cr. This merger EBITDA 14.7 21.8 15.0 21.7
will aid the company in ensuring a consistent supply of high-quality casting products and will Net Profit 13.3 58.4 20.7 36.7
have enhanced control over the supply and inventory management of raw materials. PEL is
also looking into potential acquisitions to further increase its market share and sales volume by ESG disclosure Score**
20%. Environmental Disclosure NA
Valuation & Recommendation Social Disclosure Score NA
We initiate coverage on Pitti Engineering Ltd. (PEL) with a BUY recommendation. Our Governance Disclosure Score NA
recommendation is supported by a) The company’s increasing capacity b) Its increasing Total ESG Disclosure Score NA
share of value-added products, and c) Its expanding global footprints. NA
Sector Average
We expect the company’s revenue to grow at a CAGR of 13% to Rs 1,588 Cr by FY26 Source: Bloomberg, Scale: 0.1-100
(factoring similar raw material price trend as of H1FY24 backed by volume CAGR of 16% by **Note: This score measures the amount of ESG data a company reports
FY26E). On the operational front, its EBITDA is expected to grow at 13% CAGR to Rs 258 Cr publicly and does not measure the company's performance on any data point.
All scores are based on 2022 disclosures, The Sector average is for NSE500
by FY26E, led by an increase in value-added products, resulting in operating margin expansion companies
(by 240bps 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 Cr. A combined strategic operation will Axis vs. Consensus
further support in improving the company’s ROE and ROCE to 25.8% and 26.7% respectively EPS Est. FY23 FY24E FY25E FY26E
by FY26E. Axis 18 29 35 48
We thus value the company at 19x on FY26 earnings to arrive at a Target Price of Consensus 18 26 34 47
Rs 915/share, implying an upside of 40% from the current levels. Mean Consensus TP (12M) 940

Key Financials (Consolidated) Relative performance

(Rs Cr) FY23 FY24E FY25E FY26E
Net Sales 1,100 1,201 1,351 1,588
Operating Profit 151 184 212 258
OPM (%) 13.8 15.3 15.7 16.2
Net Profit 59 100 114 154
EPS (Rs) 18.4 29.1 35.1 48.0
ROE (%) 19.0 24.8 23.9 25.8
ROCE (%) 20.9 24.6 23.1 26.7
P/E Ratio 37 22 19 14
P/BV 6 5 4 3 Source: Ace Equity, Axis Securities
EV/ EBITDA 15 13 11 9
Debt / Equity (x) 0.8 0.9 0.7 0.4
Akshay Mokashe
Source: company, Axis Research
Research Analyst
Email:akshay.mokashe@axissecurities.in

1
Financial Story in Charts

Exhibit 1: Robust order book driving healthy revenue growth (Rs Cr) Exhibit 2: Operating efficiencies leading to Improved EBITDA Margins

Source: Company, Axis Securities

Exhibit 3: Capacity addition leading to revenue growth Exhibit 4: Operating leverage leading to better EBITDA/Ton

Source: Company, Axis Securities

Exhibit 5: Earnings Growth led by structural shift (in Cr) Exhibit 6: Vigorous focus on reducing debt

Source: Company, Axis Securities

Exhibit 7: Value-added product mix to aid in ROE Improvement Exhibit 8: Strong FCF led by capacity addition in FY26

Source: Company, Bloomberg, Axis Securities

2
Company Overview
PEL is one of the largest
Pitti Engineering Ltd. (PITTIENG) has over 4 decades of experience in the manufacturing sector and specializes in manufacturer and exporter
the production of sheet metal components. PEL has a diversified range of products from motor cores and sub- of electrical laminations
assemblies to die-cast rotors and precision machining of metal components. Its fully automated manufacturing from India.

facilities operate in two segments – Motors and Generators and Components. It is also one of the market leaders It is also one of the leading
for assemblies for large alternators and motors in India. Indian railways have three to four approved suppliers for suppliers to all motor
its diesel and electric locomotives supply and all these companies fall under PEL’s marquee clientele. manufacturers in India.

Company Structure
PEL will receive yearly
PEL is headquartered in Hyderabad, Telangana. The company has three manufacturing plants two in Hyderabad
incentivized income for its
where this facility majorly focuses on export orders and one in Aurangabad where manufacturing of sheet metals Aurangabad facility under the
and machining is carried out. The company has one un-operational subsidiary Pitti Rail and Engineering Mega Project Initiative
Components a wholly owned subsidiary which is soon to be merged under Pitti Engineering. PEL does not have Package Scheme 2013 of
Maharashtra.
any Joint Ventures or Associate companies.

Pitti Engineering manufacturing facilities

Exhibit 9: Manufacturing Facilities:

Source: Company, Axis Securities

 Hyderabad: Two manufacturing facilities located in Hyderabad have larger machining capacity and

majorly cater to the export market.

 Aurangabad: A state-of-the-art manufacturing facility that has a larger lamination capacity is

strategically located to cater to its end customers.

3
Manufacturing Capacities

Exhibit 10: Sheet Metal Capacity vs Capacity Utilizations (in MT) Exhibit 11: Machining Hours

Source: Company, Bloomberg, Axis Securities

End User Application as % of Revenue

Exhibit 12: End User Application as % of Revenue (FY22) (in Cr) Exhibit 13: End User Application as % of Revenue (FY23) (in Cr)

Source: Company, Bloomberg, Axis Securities

Exhibit 14: End User Application revenue breakup (in Cr)

CAGR 3
End User Application revenue Breakup FY22 FY23 H1FY24 FY26E* End Use Exports
yrs
Traction M & R Comp 249 374 203 560 14.4% Railways >50%

Special Purpose Motors 110 110 53 140 8.4% 20%

Wind and
Renewable Energy 37 47 20 110 32.9% 50%
Hydro
Power Generation 144 157 89 190 6.5%

Mining, Oil & Gas 46 78 19 80 0.9% 75-80%

Industrial & Commercial 151 149 79 200 10.3%

Data Centre 20 24 9 35 12.6% Generators

Vehicles,
Automotive 0 6 2 30 71.3%
EVs, etc
Appliances & Consumer 16 4 1 40 125.2% Fans

Others 180 151 106 203 10.5%

Total Revenue 953 1,100 580 1,588 13%

Notes*: Revenue estimates factoring H1FY24 raw material price trend.

4
Exhibit 15: End User Industries

Source: Company, Axis Securities

Exhibit 16: PEL Marquee clients

Source: Company, Axis Securities

5
Product Lines

Sheet Metals Precision Machining Assemblies

One of the largest anufacturers

Hi-end Japanese and Expertise in handling large-scale
Summary and exporters of electrical
German CNC machines stator cores.
laminations from India.

Produces diameter 14mm to 5Axis CNC machines up to 1,600mm X

Motor and Generator Core Assemblies
Specification 1357mm size used in 20+ end- 1,600mm travel for complex machining
up to a diameter of 2000mm
user industries parts

End Product
images

Source: Company, Bloomberg, Axis Securities

Product Pictures

Exhibit 17: PEL Marquee clients

Product: Component Product: Traction Motor

Description: A support frame for a mining truck (off-highway vehicle) Description: Used in locomotives
Customer: Caterpillar Customer: Wabtec
Source: Company, Bloomberg, Axis Securities

6
Story So Far…
In the last 5 years, PEL has aggressively focussed on expanding its capacity and improving its EBITDA/Ton by
introducing value-added products. This strategy has significantly helped the company as its revenue has grown
twofold in the last 5 years. PEL is increasing its sheet lamination installed capacity from 50,200MT to 72,000MT
by FY24 end which was expected in H1FY25. It has also structured its manufacturing facility where the
Aurangabad facility manufactures end products and caters to the domestic clientele and the Hyderabad facility
assembles value-added products which is exported.

Exhibit 18: Capex Timeline

Source: Company, Axis Securities

7
Story Ahead…
PEL is aggressively focusing on a value-added product mix and increasing revenue share from the Fall in the order book graph is
component segment. Additionally, with an increase in government spending towards infrastructure and due to correction in raw
material prices. Steel prices in
railways, PEL has been one of the direct benefactors as Indian railways have approved only three to four the last 1 year have declined
suppliers for the diesel and electric locomotives supply and all these companies fall under PEL’s marquee by ~20%
clientele. Earlier, PEL used to supply products to 100 windmills a year whereas with increasing demand in
the renewable energy segment, PEL is currently supplying its products to 100 windmills per month. This
supply is expected to further increase as many players have made India a hub for sourcing for its South
Asian countries’ needs.

Exhibit 19: Order Book (in Cr) Vs Sales Volume (MT)

Source: Company, Bloomberg, Axis Securities

8
Merger with Pitti Castings
PCPL’s revenue in the last
PEL recently announced the merger of its group company – Pitti Castings Pvt. Ltd. to itself for an enterprise value
2 years grew at a CAGR of
of Rs 100 Cr. This merger is expected to be completed by FY24 end after completing all necessary approvals and 18% to Rs 150 Cr and
other compliance parts. Promoter stake will increase by 2.5% as the promoters have got shares in swap ratio EBITDA margins have
expanded by 200bps to
which is one share for 55 shares held by the promoters in Pitti Castings Pvt. ltd.
8.5% in FY23 vs. 6.5% in
FY21.
About the company

PCL – incorporated in 2011, has distinctive capability in manufacturing Spheroidal Graphite iron-graded parts
with zero impact resistance used in windmill locomotives, high tensile SG-graded parts used in mining trucks and
High MnNi alloy carbon steel castings with sub-zero impact resistance used in locomotives and mining. PCPL has
a CLASS-A Foundry Certified by the Research Designs and Standards organisation, Ministry of Railways India
(RDSO). A state of art foundry manufactures high-quality castings from a weight range of 50 kg to 300 kg. In
FY23, the capacity of PCPL stood at 8,000 MT whereas its utilisation stood at 56%. Currently, capacity stands at
14,400MT and with robust demand and a healthy order book, it is expected to reach 80% utilisation levels by
FY25.

Exhibit 20: PEL Marquee clients

Source: Company, Bloomberg, Axis Securities

Unlocking Potential
In FY23, PEL contributed Rs 80 Cr in revenue for PCPL amongst its total turnover of Rs 150 Cr. This merger will
help PEL to further improve its revenue by diversifying its business and new set of PCPL’s existing clients. This
merger will also broaden PEL’s global footprint and will have enhanced control over the supply and inventory
management of raw materials. On profitability, PEL’s EBITDA margins will further improve as the components
business yields higher double-digit margins compared to its existing steel lamination manufacturing set-up.

In FY23, PEL initiated the direct supply of suspension and axle housing gear protectors to Indian Railways, with
additional products awaiting approval. This development holds the promise of the components business
achieving a revenue potential of Rs300 Cr by FY26. According to management guidance, the components
business is expected to contribute approximately 40% of the total revenue by FY29.

Potential Acquisition?
With robust demand from the railway segment and increasing order books, PEL is currently evaluating all
possible options to acquire any existing company and increase its market share. Management has guided that it
will plan to acquire a company that generates a revenue between Rs 275-325 Cr, operating profit in the range of
15-20 Cr and sales volume ranging from 10,000 MT to 15,000 MT. Management has also guided that if they see
such opportunities they will be willing to pay at 8-9x EV/EBITDA.

9
Management meeting Takeaways
Key Takeaways
 The EV market is still undiscovered as currently most of the motors for EV vehicles are imported. If the
government of India decides to localise this market, PEL will have an upper hand in future orders backed
by its 3 decades of motor manufacturing experience.

 Total debt for the company in FY23 stands at Rs 280 Cr, where we expect debt to increase to a max of
Rs 350-390 Cr due to robust expansion activities. Incremental capex will be carried out from its internal
accruals only.

 To increase its capacity and further gain market share, PEL is looking into acquisition prospects with
sales volume ranging between 10,000-15,000MT.

 Reduction in raw material cost has resulted in a reduction of the working capital cycle.

 The components business will contribute 40% of net sales by FY27 which yields 20-22% of EBITDA
margins.

Domestic market
 The Indian Government has significantly increased its focus on the development of the Indian railways
and Metro.

 Only three to four suppliers have been given the approval to supply products for the Indian Railways
where PEL is the major to these companies. So any incremental demand in the railway segment will
directly benefit PEL

 PEL has started supplying components directly to the Indian railways.

 FY23-24 is witnessing a robust Capex in renewable energy activities

 The Capex activities undergone by the company had two primary motives of high automation and less
expensive economy of scale.

 Amongst its existing clientele, Cummins, Alstorm, VABTEC, Siemens and ABB are the major revenue
contributors.

 The company has 10% market share of the total market size and around 36% market share of the
organised market.

International market
 The international market has witnessed increasing robust demand in the marine applications and
renewable energy segment.

 PEL mainly receives international orders via its domestic clientele as its manufacturing facilities are also
located in other countries.

 Northern America is witnessing a massive modernization of public infrastructure

 PEL has witnessed new orders from the European market which contributes ~Rs 100 Cr to revenue. The
European market is opening for larger assembly products where the company expects to supply
components in the next 2 years.

 Almost 50% of revenue in Traction Motor is from export orders. PEL is witnessing an increase in the
addition of railways in the international market which will further increase the company’s top line.

10
Key Growth Drivers
Railways replacement demand

Revamping of cargo train systems has been carried out in the North American Market. It is either replacing
certain parts or fully replacing the locomotives ranging to ~ 20,000 cargo trains. The yearly target of 800-900
trains is currently been in process. With PEL’s increasing market share in the export market and its wide range of
value-added products, we foresee huge potential in the North American market. Indian railways under multiple
projects like Train 18, Vande Bharat, etc are spending on revamping the passenger train system. The
replacement market of railways domestically and internationally is expected to be 5 times of the new locomotive
market.

Renewable energy sector

India is one of the fastest-growing economies and is finding alternatives through renewable energy sources to
meet its surging energy needs. GOI by FY30 plans to achieve a 500GW non-fossil fuel-based capacity through
solar and wind power. On the international front, India is becoming a hub for sourcing machinery to cater to the
South Asian countries' needs and export to the international market.

EV adoption

The Indian EV market is expected to grow at a CAGR of 49% in the next 3-5 years. Currently, the majority of
motors used in the EV vehicles are imported, however, with the ‘Make In India’ belief and change in government
norms for localised products, we believe a significant demand can be witnessed from the EV market. PEL’s
expertise in the motor manufacturing segment will play an upper hand and aid in incremental growth for the
company. In FY22, penetration of electric 2-wheelers, 3-wheelers, passenger vehicles, commercial vehicles, E-
Bus and ELCV stood at 4-6%, 5.4%, 0.6%, 4.8% and 0% respectively and in FY27 is expected to reach to 25-
30%, 30-35%, 6-8%, 9-11% and 4-6% respectively.

11
Outlook & Valuation
We believe our recommendation is supported by a) PEL’s robust Capex and capacity addition directly resulting in
strong improvement in the company’s order book, b) Increasing revenue contribution from value-added products
(components), c) Upcoming merger with Pitti Castings resulting in improving ROE and ROCE (to 25.8% and
26.7% respectively) and improvement in operating margins (by 240bps to 16.2% by FY26). At the current CMP,
the stock looks attractive at 14x 2 Yr-Fwd consensus PE. In view of the above-mentioned growth drivers, we
value the company at 19x on FY26 earnings to arrive at a Target Price of Rs 915/share, implying an upside of
40% from the current levels.

Exhibit 21: 12-Month FWD PE Band chart Exhibit 22: 1 YR FWD PE Band chart

Source: company, Axis Securities

12
Peer Comparison
PEL has superior revenue growth momentum as compared to Indian peers with robust execution capabilities with
sustainable growth outlooks going ahead. The company also delivered strong margin expansions with cost
optimization initiative, strong volume growth and richer product mix. Historically, PEL has outperformed its
domestic peers on operating margin front. We believe PEL will surpass growth in terms of profitability and
higher CAGR earnings growth at 38% from FY23E to FY26E.

Exhibit 23: Peer Comparison

Revenue (Rs Cr) Operating Profit (RS Cr) Operating Profit Margin (%) Profit After Tax (Rs Cr)
Company Name
FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23

Pitti Engineering 525 518 954 1,100 78 78 132 151 14.8% 15.1% 13.8% 13.8% 17 29 52 59

Growth YoY(%) -15.6% -1.3% 84.1% 15.3% -13.7% 0.4% 69.1% 14.7% -27.9% 68.3% 80.3% 13.3%

Magcore
110.5 131.5 300.8 11.9 13.2 25.1 11% 10% 8% 11.9 13.2 25.2
Lamination India
128.7
Growth YoY(%) -2.5% 19.0% -8.5% 10.9% 90.2% -8.5% 10.9% 90.9%
%
Tempel Precision
Metal Products 209.8 231.2 388 14.5 18.5 41.5 7% 8% 11% 7.1 9.7 27.3
India Pvt. Ltd.
124.3 181.4
Growth YoY(%) -9.5% 10.2% 67.7% -23.7% 27.6% -39.3% 36.6%
% %
Bagadia Chaitra
Industries Pvt. 93 105.4 237 3 7.7 15.4 4% 7% 6% -3 1.8 6.8
Ltd.
-
125.0 133.3 100.0 277.8
Growth YoY(%) -4.5% 13.3% -56.6% N.A. 169.2
% % % %
%
Source: Company, Axis Securities.

Key Risks

 Slowdown in Capex activities: Any delay in the company’s Capex activities will result in opportunity loss
as currently, the Indian economy is going through robust Capex activities and is focussing on railway,
power generation and infrastructure development. PEL can lose orders if it doesn’t cater to the speeding
industry demand.

 Volatility in raw material prices: Fluctuations in steel prices would impact margins as the company
imports as well as locally sourced electro steel from three companies (Posco, JSW & China Steel)

 Geopolitical risks: Increase in Russian-NATO tensions, Cyber attacks, US-China competition and other
such tensions can disrupt global trade affecting demand and leading to volatility in inflation cycles. PEL’s
1/3rd of revenue is accounted for from the export market. Such tensions can negatively impact a
company's order book and profitability.

 Fund Raise: Companies often opt for various financing options to support growth initiatives. Avenues like
debt, equity and other financing instruments can be considered to explore capacity expansion in a
strategic move of internal accruals prove insufficient.

13
Management Profile
Key Management Personnel Experience

Mr. Sharad Pitti  Mr. Sharad Pitti is the founder of the company with ~ 4 decades of industry
Chairman & Managing Director experience.
Since 1983

Mr. Akshay Pitti  Mr. Akshay Pitti at an early age started his entrepreneurial journey where he served
Vice-Chairman & Managing Director. in different roles for the organisation.
Since 2004

 Ms. Gayathri Ramachandran, IAS (Retd.) has held prominent positions in the
Ministries of Power, Petroleum, Chemical & Fertiliser and Civil Aviation.
Ms. Gayathri Ramachandran
Non-Executive Independent Director  She also has served as a Special Chief Secretary to the Government of Andhra
Since 2014
Pradesh. She is the Chairperson of the Company’s Stakeholders Relationship
Committee.

 Mr. G Vijaya Kumar is a practising Advocate at the High Court of Telangana and
has also served as a Government Pleader for revenue for the United State of
Mr. G Vijaya Kumar
Non-Executive Independent Director Andhra Pradesh.
Since 2006
 He is the Chairman of the Company’s Risk Management Committee.

 Mr. M Gopalakrishna is a retired IAS officer who has held senior posts in the
Government of Assam, Andhra Pradesh and the Government of India. He also
served in the Central & State level public sector undertakings and retired as
Mr. M Gopalakrishna
Non-Executive Independent Director Chairman and Managing Director of Rural Electrification Corporation.
Since 2007
 He has over five decades of Administrative and Managerial experience. He is the
Chairman of the Company’s Nomination and Remuneration Commimajor.

 Mr. N R Ganti holds a PG in Business Administration and has rich experience in the
Mr. N R Ganti
Non-Executive Independent Director field of finance and management. He started his career in the field of banking with
Since 2002 the State Bank of India and later took up management consultancy services.

 Mr. S Thiagarajan holds a Chartered Accountant degree and has vast experience in
Mr. S Thiagarajan financial management and accounting roles. He was the Director (Finance) of
Non-Executive Independent Director
NMDC and also served as a Board Member of various associates of NMDC. He is
Since 2015
the Chairman of the Company’s Audit Committee.

Mr. Pavan Kumar  Mr. Pavan Kumar holds a Chartered Accountant degree. He earlier served as a
Chief Financial Officer General Manager of Finance for the Company.
Since 2017

Source: Company

14
Industry Overview
Currently, total electric steel
consumption in India is
Indian Market
around 7 Lc tons and

The total size of the Indian CRNO steel lamination market in FY19 stood at Rs 3,300 Cr and is expected to lamination output is 4 Lc

grow at a CAGR of 12% by FY27. Such strong growth is expected to be driven by the replacement railway tons where Pitti has a

demand, growth in the automotive and consumer durable industry and the Indian government’s sharp focus on capacity of 72,000MT.
renewable energy segment.

Exhibit 24: Indian CRNO Steel Lamination industry (in MT)

Source: Company, Bloomberg, Axis Securities

Exhibit 24: PEL raw material – Electrical steel lamination sheets (in MT)

Source: Company, Bloomberg, Axis Securities

15
Financials (Consolidated)

Profit & Loss (Rs Cr)

Y/E Dec FY23 FY24 FY25E FY26E
Net Sales 1,100 1,201 1,351 1,588
Growth (%) 15.3 9.2 12.4 17.6
Other Operating Income 0 0 0 0
Total Income 1,100 1,201 1,351 1,588
Raw Material Expense 782 830 928 1,088
Employee Expense 85 94 101 114
Power & Fuel Expenses 11 10 13 17
Other Operating Expense 71 83 96 111
Operating Profit 151 184 212 258
Growth (%) 15 22 15 22
Operating Margin (%) 13.8 15.3 15.7 16.2
Other Income 18 43 35 35
EBITDA 169 227 247 293
Growth (%) 13.5 34.3 8.6 18.6
EBITDA Margin (%) 15.4 18.9 18.3 18.4
Depreciation 45 52 49 47
EBIT 125 175 198 246
Interest Cost 45 49 48 41
Profit Before Tax 80 126 150 205
Tax 21 33 37 51
Profit After Tax 59 93 112 154
Growth (%) 13.3 58.4 20.7 36.7
Share of Profit of an associate/OCI 0 0 0 0
Net Profit (Adjusted) 59 93 112 154
EPS 18 29 35 48
Source: company, Axis Securities

Balance Sheet (Rs Cr)

Y/E Dec FY23 FY24e FY25E FY26E
SOURCES OF FUNDS
Equity Share Capital 16 16 16 16
Reserves & Surplus 318 403 506 651
Net Worth 334 419 522 667
Borrowings 265 390 363 272
Other Liabilities 379 279 306 361
Total Liabilities 644 669 670 633
Total Equity & Liability 978 1087 1192 1301

APPLICATION OF FUNDS
Cash & Bank Balance 65 13 16 43
Investments 15 15 15 15
Advances 68 68 68 68
Fixed & Other Assets 829 991 1093 1174
Total Assets 978 1087 1192 1301
Source: company, Axis Securities

16
Cash Flow (Rs Cr)
Y/E Dec FY23 FY24E FY25E FY26E
PBT 80 126 150 205
Depreciation & amortization 45 52 49 47
Interest expense 45 49 48 41
Interest / Dividend Recd 0 -43 -35 -35
Other Adjustments 1 0 0 0
(Inc)/Dec in working capital 87 -150 -40 -49
Tax paid -35 -33 -37 -51
CF from operating activities 222 1 135 158
Capital expenditure -105 -164 -84 -24
(Purchase) / Sale of Investments 0 0 0 0
Income from investments and others 1 43 35 35
CF from investing activities -104 -121 -49 11
Inc/(Dec) in share capital 0 0 0 0
Inc/(Dec) in debt -33 125 -26 -91
Dividends & Interest paid -54 -58 -56 -49
Other Financial Activities 0 0 0 0
CF from financing activities -86 67 -83 -141
Net cash flow 32 -52 3 28
Opening balance 35 65 13 16
Other Bank Balance -2 0 0 0
Closing balance 65 13 16 43
Source: company, Axis Securities

Ratio Analysis (x) / (%)

Y/E Dec FY23 FY24E FY25E FY26E
Per share data
No. of shares ( Cr) 3.2 3.2 3.2 3.2
BVPS (INR) 104.2 130.6 162.9 208.2
CEPS (INR) 32.3 45.4 50.4 62.6
DPS (INR) 2.7 2.7 2.7 2.7
Financial Ratios
RoE (%) 19.0 24.8 23.9 25.8
RoCE (%) 20.9 24.6 23.1 26.7
Debt/Equity (x) 0.8 0.9 0.7 0.4
EBIT/Interest (x) 2.8 3.6 4.1 6.0
Turnover Ratios
Asset turnover (x) 1.8 1.5 1.5 1.7
Sales/Net FA (x) 2.8 2.4 2.5 3.1
Working capital/Sales (x) 0.1 0.2 0.2 0.2
Receivable days 59.4 60.4 61.4 62.4
Inventory days 110.3 95.3 97.3 99.3
Payable days 116.5 90.5 89.5 91.5
Working capital days 53.2 65.2 69.2 70.2
Liquidity Ratios
Current ratio (x) 1.6 2.1 2.2 2.2
Quick ratio (x) 0.9 1.1 1.1 1.2
Interest cover (x) 3.3 4.0 4.4 5.9
Net debt/Equity (x) 0.6 0.9 0.7 0.3
Valuation (x)
PE 35.6 22.5 18.6 13.6
PEG (x) YoY growth 2.7 0.4 0.9 0.4
P/BV 6.3 5.0 4.0 3.1
EV/EBITDA 15.0 13.3 11.4 8.9
EV/Sales 2.1 2.0 1.8 1.5
EV/EBIT 18.3 14.0 12.3 9.4
Source: company, Axis Securities

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 Pitti Engineering Price Chart and Recommendation History

(Rs)

Date Reco TP Research

01-Dec-23 BUY 915 Initiating Coverage

Source: Axis Securities

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About the analyst

Analyst: Akshay Mokashe

Contact Details: akshay.mokashe@axissecurities.in

Sector: Capital Goods, Building Materials and Consumer Durables

Analyst Bio: Akshay Mokashe is B.E Mechanical Engineer with ~ 5 years of experience in Equity Research

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
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Regulations, is engaged in the business of providing Stock broking services, Depository participant services & distribution of various financial products. ASL is
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 DEFINITION OF RATINGS

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Digitally signed by
NEERAJ NEERAJ CHADAWAR
CHADAWAR Date: 2023.12.01
13:45:50 +05'30'

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