Multibagger Pitti Engineering likely to see another 30% rise, says Axis Securities – key reasons

livemint.com:

Pitti Engineering (PEL) surging another 30 percent going ahead. The brokerage has initiated coverage on the stock with a ‘buy’ call and a target price of ₹915, implying a potential upside of 31 percent. The recommendation is supported by key factors: a.

Increasing Capacity: PEL has been enhancing its capacity, contributing to its growth prospects. b. Growing Share of Value-Added Products: The company's focus on value-added products is seen as a positive factor.

c. Expanding Global Footprints: PEL's global expansion is recognised as a strength contributing to its growth potential. Axis projects PEL's revenue to grow at a Compound Annual Growth Rate (CAGR) of 13% to reach ₹1,588 crore by FY26.

Operational improvement is expected, with EBITDA projected to grow at a 13% CAGR to ₹258 crore by FY26. The brokerage anticipates a cumulative boost in profitability at a CAGR of 38% by FY26 to reach ₹154 crore. Operational margin expansion is expected, reaching 16.2% by FY26, indicating a 240 basis points improvement.

A combined strategic operation is predicted to enhance PEL's Return on Equity (ROE) and Return on Capital Employed (ROCE) to 25.8% and 26.7%, respectively, by FY26. The stock has already surged 116 percent in the last 1 year and over 130 percent in 2023 YTD, giving positive returns in 7 of the 12 months till date. It has jumped over 12 percent in just 3 sessions of December.

Meanwhile, it has given double-digit returns in 4 other months. It rallied 13.4 percent in October, 37 percent in August, 27.5 percent in July and 21 percent in April. However, it shed the most in February and September, down over 6 percent each.