Stock to buy: Anup Engineering to benefit from buoyant capex cycle, says Anand Rathi; sees 19% upside

The Anup Engineering is the manufacturer of process equipment, including heat exchangers, reactors, pressure vessels, columns, towers, industrial centrifuges, and formed components.

The company serves several process industries, encompassing Oil & Gas, Petrochemicals, LNG, Fertilizers, Chemicals, Power, Water, Paper & Pulp, and Aerospace. 

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“We are of the opinion that the company is well-positioned to benefit from the robust capital expenditure cycle in the industries it operates, including petrochemicals, oil and gas, and green hydrogen initiatives. Also, the company is well positioned to take advantage of the export markets as well as diversification of its products,” said Anand Rathi.

The brokerage firm initiated a ‘Buy’ rating on the stock with a target price of ₹3,568 per share for a time horizon of 12 months.

Anup Engineering has a robust order book of ₹872.7 crore, with a record quarterly influx of ₹243 crore in October 2023. Geographically, 41% are from domestic markets, 48% from exports, and the rest from DE/SEZ. 

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The company’s management aims to complete all current orders by FY25 end (17-18 months) and holds an inquiry bank of around ₹1,000 crore, with inquiries from both domestic and international markets, including the USA, Canada, and Louisiana.

By the end of FY24, it is anticipated that exports will make up 30% of the revenue, with a further increase to 40% in subsequent periods. Export orders are expected to contribute higher margins compared to domestic orders, Anand Rathi noted.

Moreover, the company is also trying to diversify its portfolio by reducing its dependency on heat exchangers, which are its biggest revenue contributor at around 76% of revenue.

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Anup Engineering reported a revenue of ₹140 crore and EBITDA of ₹31 crore in the quarter ended September 2023, with an EBITDA margin of 22.4%. Its net profit during Q2FY24 was at ₹21.7 crore

In H1FY24, the company’s net profit increased by 122% to ₹40.3 crore, while revenue grew by 73% to ₹265 crore and EBITDA almost doubled to ₹59 crore. The ROCE for the quarter is at 23.6% whereas ROE 18.9%.

Anup Engineering commands a market capitalisation of ₹2,987 crore on BSE.

Anup Engineering shares have given decent returns to investors as the stock has rallied more than 13% in one month and over 41% in the past three months. Anup Engineering share price has jumped more than 183% in the past one year.

At 11:05 am, The Anup Engineering shares were trading 0.17% higher at ₹3,003.55 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 20 Jan 2024, 11:06 AM IST