Prabhudas Lilladher's research report on Harsha Engineers International
We revise our FY26/27E EPS estimates by -13.1%/-8.2% factoring in continued slowdown in Romania. Harsha Engineers International (HARSHA) reported a 4.5% YoY revenue increase, with an EBITDA margin expansion of 37bps to 12.6%. Domestic demand for cages and bushings remained resilient, though key export markets, including Europe and the USA, experienced weakness, along with soft demand from Japanese customers. While China showed steady improvement, Romania’s outlook remained subdued as management's efforts to optimize the product mix yielded no results. The company’s long-term supply agreement is expected to support top-line growth over the next 2-3 years, while the bearing manufacturers' China+1 strategy is likely to further enhance Harsha’s growth prospects. We believe that the continued pain in Romania may impact mid-term consolidated financial performance of the company however, HARSHA’s longterm outlook remains positive given its 1) market leadership in bearing cages, 2) greenfield capacity expansion plans, and 3) multiple levers for growth viz. i) bearing cage outsourcing, ii) capex by global bearing players in India and iii) growing demand for bronze bushings.
Outlook
The stock is currently trading at a P/E of 21.7x/16.7x on FY26/27E earnings. We maintain ‘Accumulate’ rating with a revised TP of Rs440 (Rs561 earlier), valuing the company at a PE of 21x Sep’26E (24x Sep’26E) reflecting management’s cautious outlook on subsidiary performance.
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