Buy Pitti Laminations for target of Rs 158: ICICIdirect

ICICIdirect.com 's research report on Pitti Laminations

“Pitti Laminations (Pitti) is a leading manufacturer of electrical steel laminations (capacity 32000 tonne), motor cores, sub-assemblies, die-cast rotors and press tools. These products find application in basic capital goods products viz. motors and alternators, which are the quintessential products used in process engineering. Pitti, by virtue of supplying specialised custom made quality product, has a very strong clientele with most clients sticking with Pitti for a fairly long time. Domestically, in the laminations segment, Pitti’s clients include ABB, Alstom, Bhel, Crompton Greaves, Cummins, L&T, ReGen Powertech, Siemens and Voith among others. On the global front, GE group entities mainly GE Transportation Systems (GETS) and GE Consumer and Industrial (GECI) constitute the major chunk of its exports.”

“Pitti’s topline has grown at a CAGR of 14.4% in FY10-14 while its PAT has grown at a CAGR of 93.4% in FY10-14 largely due to forex fluctuations. Pitti clocked a topline of Rs 247.8 crore in FY14 with corresponding EBITDA at Rs 32.7 crore and PAT at Rs 4.2 crore. Post a subdued FY14, the performance has improved in FY15 and is gaining traction with 9MFY15 sales at Rs 37 crore, up 31% YoY (Rs 181 crore in 9MFY14) and 9MFY15 profit at Rs 5 crore (Rs 2 crore in 9MFY14).”

“Pitti has shifted ~47% (15000 tonne) of its total installed capacity (32000 tonne) to a new facility in Pune, Maharashtra. The shift in capacity was undertaken as majority (~65%) of its domestic customers are based out of the industrial belt near Pune while two of its main raw material suppliers (Posco & ThyssenKrupp) are also based out of the same region. This will lead to better business dynamics at Pitti, thereby helping them to reduce the lead time and savings in terms of transportation & logistics costs”, says Icicidriect.com’s research report.

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