Shares of Pitti Engineering surged by 7 percent, reaching an all-time high of Rs 690 on the BSE on October 16, following the initiation of coverage by brokerage firm Phillip Capital with a ‘buy’ rating. Phillip Capital envisions a substantial upside potential of 36 percent from the current levels. Meanwhile, the S&P BSE Sensex maintained a steady position at 66,300 levels as of 1 pm.
Over the past six months, the stock of this small-cap company has more than doubled, in stark contrast to the benchmark Sensex, which witnessed a modest 9 percent increase.
On October 16, approximately 0.5 million equity shares changed hands on both the NSE and the BSE, a significant increase compared to the weekly average of 0.2 million shares traded, according to available data.
Pitti Engineering is a prominent manufacturer and exporter of electrical laminations in India, with the company serving as a key supplier to domestic motor manufacturers. It specializes in the production of value-added motor/generator sub-assemblies and precision machine components for a wide range of sectors.
Analysts at Phillip Capital expressed their optimism regarding the stock, citing strong industry tailwinds, capacity expansion, and a move up the value chain, all of which are expected to enhance the company’s profitability.
“We value Pitti Engineering at 20 times (x) of FY26 earnings. The stock currently trades at a price-to-earnings (PE) ratio of 25x/18x/14x on FY24/25/26 earnings. The company’s valuation is likely to improve due to higher earnings growth, robust cash flow, and improved return ratios,” noted the brokerage firm.
The company’s increased focus on value-added products is anticipated to boost both revenue and margins in the period from FY23 to FY26. Furthermore, the merger with Pitti Casting is poised to contribute to enhanced margins and fortify the component business.
In the quarter ending in June (Q1FY24), Pitti Engineering’s total income experienced a 7 percent year-on-year decline, falling from Rs 304 crore to Rs 290 crore. Despite this, the company’s net profit surged by an impressive 40 percent, reaching Rs 14 crore.
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