Buy Pitti Engineering; target of Rs 754: KR Choksey

KR Choksey's research report on Pitti Engineering

Pitti Engineering (PEL) is India's largest and most renowned manufacturer of Electrical Sheet Metal products, founded in 1983. It operates fully automated manufacturing facilities in Telangana and Aurangabad and is divided into two primary business segments: Motors and generators, and components. The company boasts a diverse product portfolio and holds a leading position in assembling large alternators and motors in India. Some of its esteemed clients include GE, Siemens, and Wabtec. PEL's order-book currently stands at INR 8,230 Mn and is expected to grow further due to government emphasis on Railway development projects and ongoing capex plans from industrial and infrastructure companies. PEL is also a trailblazer in manufacturing traction motor sub-assemblies in India. A significant portion, 33% of its total revenues, comes from exports. Remarkably, over 50% of PEL's revenues are derived from its monopoly business. An illustrative example of this is PEL being the sole supplier for motor assemblies to Railways, even though they have multiple approved suppliers for their diesel and electric locomotives. Regardless of which supplier receives the order, the motors must be supplied by Pitti Engineering.

Outlook

Based on these positive factors, we recommend a “BUY” rating for the company with a Target Price of INR 754, which corresponds to 18x the estimated EPS for FY25.