Buy Pitti Engineering; target of Rs 1379: KR Choksey

KR Choksey's research report on Pitti Engineering

Pitti Engineering Limited has reached an agreement to acquire 100.0% of the equity share capital of Dakshin Foundry Private Limited (“DFPL”) from its shareholders for an equity value of INR 1,531.2 Mn. The cost of acquisition includes both business value and working capital of DFPL. Dakshin Foundry Private Limited specializes in producing high-quality castings in various materials including ductile iron, grey iron, low carbon steel, alloy steel, and simo iron. Additionally, the Company offers valueadded services such as pattern making, painting, heat and surface treatments, and machining. The acquisition of DFPL is complementary to the operations of the listed entity and its subsidiaries. It will enhance their production capacity and operational capabilities, aligning with the Company’s strategy for inorganic growth. On July 08, 2024, Pitti Engineering announced a QIP to raise up to INR 3,600.0 Mn at a floor price of INR 1,045.25. Post the fundraise, the Company announced its first acquisition of DFPL.

Outlook

Accordingly, we raise our target price to INR 1,379 (previously: INR 1,132). Despite recent increase in the stock price since the last result update, we still see an upside potential of 14.9% from currentlevels. We retain our “BUY” rating on Pitti Engineering Ltd.

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