Based on existing environment and management's focused approach, the brokerage expects topline to grow by CAGR of 21.5 percent for next 3 years (against 33 percent CAGR growth expected by the company).
Shares of The Anup Engineering rallied more than 12 percent in three consecutive sessions, including 6 percent upside seen on January 13, after global brokerage house PhillipCapital initiated coverage with a buy call on the stock.
"We like the company due to demerger which acted as a catalyst to participate in an emerging opportunity, robust operating performance, its aspiration to reach Rs 1,000 crore revenue over next 5 years, strong opening order book and greenfield plant expansion," said the research firm in its note on January 9.
The Anup's revenue / EBIDTA / PAT grew by CAGR of 18.4 / 27.2 / 29.9 percent respectively during FY14-19 period. It has a strong balance sheet with net cash of Rs 60 crore as on FY19.
The company spent around Rs 100 crore in the last two years and are planning to spend an additional Rs 200 crore for the greenfield plant at Kheda and expansion at existing Odhav plant.
The Anup has started FY20 on a very strong order book of Rs 300 crore, executable over next 3-4 quarters, management is confident of 30 percent revenue growth in FY20.
"The Anup is a well-established name amongst end users/consultants; this is demonstrated by its industry-beating operating margins, consistent growth and strong balance sheet," said the brokerage.
The company is engaged in the design and fabrication of process plant equipment which mainly includes heat exchangers, pressure vessels, centrifuges, columns/towers and reactors.
"Globally it's a very large industry and growing at 8-9 percent per annum. The domestic industry is estimated at $6 billion with only 4-5 major players," PhillipCapital said.
It further said the company adopted a multi-pronged strategy 1) capex of Rs 300 crore over FY18-22 period, 2) Enhance technical capabilities and 3) expand into new geographies and user industries.
Based on the existing environment and management's focused approach, the brokerage expects topline to grow by CAGR of 21.5 percent for the next 3 years (against 33 percent CAGR growth expected by the company).
The stock has a potential of re-rating based on promising outlook and strong operating performance, said the research house which recommended a buy with a price target of Rs 668.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.